United Breweries Limited (UBL) has received a favourable order from the Bombay High Court, quashing a tax demand of Rs 21.92 crore. The case, involving contract brewing activities from 2009-2011 performed by the now-amalgamated Millennium Beer Industries, has been dismissed on grounds of limitation and consistency. This ruling clears a long-standing contingent liability, providing financial clarity to investors.
United Breweries Wins Tax Battle, Eliminates Rs 21.92 Crore Contingent Liability
- Tax liability reduced from Rs 21.92 crore to Nil.
- Bombay High Court dismisses Revenue's appeal regarding 2009-2011 service tax.
Reader Takeaway: Favourable High Court ruling removes financial uncertainty, boosting the balance sheet by extinguishing historical tax claims.
What just happened
The Bombay High Court, Aurangabad Bench, has dismissed an appeal filed by the Commissioner of Central GST and Service Tax. This effectively ends a tax litigation case involving United Breweries Limited (UBL) for the period between September 2009 and November 2011. The demand originally amounted to Rs 21.92 crore, plus applicable interest and penalties.
Why this matters
The dispute centered on contract brewing activities conducted by Millennium Beer Industries Limited (MBIL), which was merged into UBL in 2010. The Revenue department had argued these activities were subject to service tax as "Business Auxiliary Service." By ruling in favour of the company, the Court has provided legal finality to this historical operational issue.
The backstory
The case originated from a challenge to an earlier CESTAT Mumbai order that had previously supported MBIL. The High Court upheld the CESTAT decision, citing that the demand was barred by the limitation period and noting that the Revenue department had already accepted a similar position in an earlier, comparable matter.
What changes now
UBL effectively removes this contingent liability from its books. For investors, this eliminates a potential financial obligation and reduces the legal overhang associated with past amalgamations of the company.
What to track next
Investors should monitor future quarterly updates for any further disclosures regarding the potential reversal of any provisions, if previously created, related to this specific litigation.