The Company contests Rs 143.277 crore tax demands, led by excise

The Company contests Rs 143.277 crore in quantified tax demands across 16 cases, led by two pending excise appeals over whether card personalisation constituted manufacturing. The two orders specify Rs 60.123 crore of excise duty, excluding interest, and Rs 84.207 crore of penalties, together exceeding the Company’s Rs 13.081 crore litigation materiality threshold.

How large are The Company’s disclosed tax demands?

The Company’s disclosed tax demands total Rs 143.277 crore across 16 cases, of which indirect-tax matters account for Rs 142.754 crore across 15 cases. The remaining direct-tax case involves Rs 52.3 lakh. The disclosures state that these figures are quantifiable amounts in dispute or demand, rather than a determination that the Company must ultimately pay them.

Indirect tax therefore represents nearly all of the disclosed quantified tax exposure by value, at Rs 142.754 crore of the Rs 143.277 crore total. The two separately described Central Excise disputes concern orders for duty and penalties totalling Rs 144.33 crore before interest, while the consolidated indirect-tax table reports Rs 142.754 crore across all 15 matters. The disclosure does not explain the difference between those figures or provide a case-by-case reconciliation.

Why are card-personalisation excise cases central to The Company’s tax demands?

The Company’s two largest disclosed tax cases arise from allegations that personalisation of cards should have been accounted for as manufacturing for central-excise purposes. In both matters, the Office of the Commissioner of Central Excise and Service Tax, Mangalore alleged contraventions of Sections 2, 3 and 4 of the Central Excise Act, 1944, alongside Rules 4, 6, 8 and 12 of the Central Excise Rules, 2002.

The alleged mechanism is the same in both matters: the authority said the Company failed to treat card personalisation as manufacturing and consequently assessed excise duty incorrectly on certain goods. Manufacturing is material in this context because the authority’s position would bring the process within the applicable excise-duty framework. The Company denied the allegations in responses to the respective show-cause notices, and both matters remain pending before the Customs Excise and Service Tax Appellate Tribunal, Bangalore.

The first case began with a March 8, 2017 show-cause notice. The Commissioner’s October 29, 2018 order directed payment of Rs 35.17 crore in duty, plus interest, and imposed a Rs 51.717 crore penalty for alleged non-payment or inadequate payment of duty. The Company appealed on April 24, 2019, seeking, among other reliefs, to have the order set aside.

The second case began with an April 25, 2018 show-cause notice and resulted in a January 11, 2020 order. That order directed Rs 24.953 crore of duty, plus interest, and a Rs 32.49 crore penalty. The Company appealed to the same tribunal on May 29, 2020. The continuing relevance of these demands depends on the tribunal’s decisions and any subsequent proceedings, neither of which is disclosed in the material provided.

How do the two excise orders compare?

The two excise orders together specify Rs 60.123 crore of duty and Rs 84.207 crore of penalties, before unquantified interest. The October 2018 order is larger than the January 2020 order in both components: its duty direction is Rs 10.217 crore higher and its penalty is Rs 19.227 crore higher. Both orders follow the same core allegation concerning card personalisation.

Penalties account for more than the duty amounts in each order. The October 2018 order’s Rs 51.717 crore penalty exceeds its Rs 35.17 crore duty component, while the January 2020 order’s Rs 32.49 crore penalty exceeds its Rs 24.953 crore duty component. Interest is also payable under each order if the authority’s determinations stand, but the disclosure does not quantify that interest, so it is not included in the Rs 144.33 crore combined duty-and-penalty calculation.

How does the litigation compare with The Company’s disclosure threshold?

The Company set Rs 13.081 crore as its materiality threshold for litigation under a policy adopted by its Board on August 20, 2026. That amount was the lowest of three specified tests based on restated financial information: 2% of Fiscal 2026 turnover, 2% of net worth as at March 31, 2026, and 5% of the average absolute profit or loss after tax for the preceding three fiscals.

The other two calculated benchmarks were Rs 26.535 crore, representing 2% of Fiscal 2026 turnover, and Rs 22.108 crore, representing 2% of net worth at March 31, 2026. The selected Rs 13.081 crore threshold was based on 5% of the three-year average absolute profit or loss after tax. The policy also covers proceedings below that level when their outcome could materially affect the Company or where a decision in one proceeding could affect similar proceedings.

Each of the two excise orders exceeds the Rs 13.081 crore threshold even when viewed by duty alone: Rs 35.17 crore in the 2018 order and Rs 24.953 crore in the 2020 order. Including penalties, the orders total Rs 86.887 crore and Rs 57.443 crore respectively. The consolidated Rs 143.277 crore quantified tax-demand figure is more than 10 times the stated threshold, although tax matters are disclosed on a consolidated basis unless an individual tax matter exceeds the threshold.

What is the current status of The Company’s tax litigation?

The Company has no disclosed outstanding criminal litigation initiated against it, no other material proceedings initiated against it, and no outstanding actions by statutory or regulatory authorities against it as of the red herring prospectus date. Its disclosed Company-level tax litigation nonetheless includes 16 quantified cases, with the two card-personalisation excise disputes pending before the appellate tribunal in Bangalore.

The Company’s subsidiaries have nil disclosed tax proceedings, whether direct or indirect. That comparison places the quantified tax disputes at the Company level rather than in subsidiaries. The disclosure separately records a Rs 15.2 lakh cheque-dishonour complaint filed by the Company on November 23, 2022, but that proceeding is not a tax matter and is not included in the Rs 143.277 crore tax total.

Conclusion

The Company’s tax litigation is defined by indirect-tax disputes, particularly two appeals concerning the treatment of card personalisation as manufacturing. The reported Rs 143.277 crore of total quantified tax demands is overwhelmingly indirect tax, while the two detailed excise orders specify Rs 144.33 crore of duty and penalties before interest. The figures show the scale of the allegations but do not establish a final liability because both appeals remain pending.

The next disclosed developments are the outcomes of the April 24, 2019 and May 29, 2020 appeals before the Customs Excise and Service Tax Appellate Tribunal, Bangalore. Further updates could clarify any quantified interest and reconcile the difference between the two-order total and the consolidated indirect-tax table.