Cadbury's Indian Excise Order draws Notice from US SEC
IN its Annual Report submitted to the United States Securities and Exchange Commission (SEC) on 19th February 2016, Mondelez International, Inc. stated:
In February 2013 and March 2014, Cadbury India Limited (now known as Mondelez India Foods Private Limited), a subsidiary of Mondelez International, and other parties received show cause notices from the Indian Central Excise Authority (the "Excise Authority") calling upon the parties to demonstrate why the Excise Authority should not collect a total of 3.7 billion Indian rupees (approximately $57 million U.S. dollars as of December 31, 2015) of unpaid excise tax and an equivalent amount of penalties, as well as interest, related to production at the same Indian facility. We contested these demands for unpaid excise taxes, penalties and interest. On March 27, 2015, after several hearings, the Commissioner of the Excise Authority issued an order denying the excise exemption that we claimed for the Indian facility and confirming the Excise Authority's demands for total taxes and penalties in the amount of 5.8 billion Indian rupees (approximately $88 million U.S. dollars as of December 31, 2015). We have appealed this order. In addition, the Excise Authority issued additional show cause notices on February 6, 2015 and December 8, 2015 on the same issue but covering the periods January to October 2014 and November 2014 to September 2015, respectively. These notices added a total of 2.4 billion Indian rupees (approximately $36 million U.S. dollars as of December 31, 2015) of unpaid excise taxes as well as penalties to be determined up to an amount equivalent to that claimed by the Excise Authority and interest. We believe that the decision to claim the excise tax benefit is valid and we are continuing to contest the show cause notices through the administrative and judicial process.
On February 11, 2016, we received a "Wells" notice from the SEC indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against us for violations of the books and records and internal controls provisions of the Exchange Act in connection with the investigation. We intend to make a submission to the staff of the SEC in response to the notice.
The 'Wells Notice':
A ‘Wells Notice' is a communication from the staff to a person involved in an investigation that:
(1) informs the person the staff has made a preliminary determination to recommend that the Commission file an action or institute a proceeding against them;
(2) identifies the securities law violations that the staff has preliminarily determined to include in the recommendation; and
(3) provides notice that the person may make a submission to the Division and the Commission concerning the proposed recommendation.