Seagram India has been issued with a show cause notice by the Indian Directorate of Revenue Intelligence (DRI) for evading customs duty, to the sum of Rs38 crore ($8.4m), by under invoicing on its imports.

The under invoicing, according to local reports, was for the five year period between January 1995 and June 2000. India's Indian Express has calculated that although the total evasion amounts to Rs38 crore ($8.4m), taking into account the interest due, the 100% penal charges and a 25%-30% redemption fine, the company could face a bill of Rs100 crore ($22.2m).

The DRI is reportedly proposing to prosecute the company along with four officials - Akram Fahmi (former chairman), Param Oberoi (CEO), Sunil Mehdiratta (head of corporate affairs) and Harvinder Singh Bhatia (chief of imports).

When contacted Seagram it responded in a statement: "Valuation of the import of Scotch for determination of customs duty in India has been the subject of review and discussion with the Valuation Cell of Customs Authorities since Seagram commenced its business in 1995 in India.

"Seagram Manufacturing Limited has received a show cause notice from the Directorate of Revenue Intelligence (DRI) on the 21 December 2000. The show cause notice that is currently being examined by the company and its lawyers will be responded to within the stipulated 30 days.

"Seagram has successfully built its business over the last eight decades in 180 countries globally abiding by the law and policies in each country, including India."

Sources at the DRI told local press that during the course of investigations it came to the notice of the DRI that Seagram had been importing two types of Scotch concentrates, which are then blended and sold on the Indian market.

These concentrates were blended whisky at about 60% abv, which after addition of water was bottled and sold. And, malt whisky at 60% abv, which was then blended with locally produced whisky and marketed as blended whisky.

Seagram is accused of declaring these imports as concentrates of alcoholic beverages instead of classifying them as whisky and thus saving on import duty payments.

The DRI sources have also revealed that the authorities believe Seagram has misdeclared the quantity of goods in a few cases thereby clearing excess goods without the cover of a valid import licence.