'India Investigating Pernod Ricard, Diageo Over Scotch Imports Under UK Trade Pact; Indian Tax Inspectors Questioned Pernod Executives In Surprise Visit Last Week; Diageo Also Being Probed Over How It Classifies Some Bulk Scotch Imports; Pernod, Diageo Say They Are Cooperating With Indian Authorities' - Reuters Exclusive

Pernod, Diageo face host of challenges in Indian market
Inspectors questioned Pernod’s India executives last week, sources say
Focus is on how bulk Scotch is declared for tariff payments
Both companies say they are cooperating with authorities
NEW DELHI, Oct 19 (Reuters) - Indian tax officials are investigating whether liquor giants Pernod Ricard PERP.PA and Diageo DGE.L wrongly classified some bulk Scotch imports, allowing them to pay lower tariffs introduced under the recently agreed India-UK trade pact, five industry sources familiar with the matter said.

Import tariff disputes have long been a sore point for foreign investors in India and embroiled companies like Samsung, LG and Volkswagen. They often involve large back-tax demands raised years after the items were imported, with Indian officials saying they are only enforcing the law.

Last week, tax inspectors made an unexpected visit to Pernod's India headquarters near New Delhi where they questioned company executives about their Scotch imports, three of the people said.

Diageo's Indian unit, United Spirits UNSP.NS, in a stock exchange filing last week said its offices in multiple locations were searched on Friday as part of an "industry-wide exercise" by authorities, without saying what the search related to. The other two people said Diageo is also being investigated for how it classifies some Scotch imports.

Pernod PERP.PA told Reuters in a statement that it is cooperating with the Directorate of Revenue Intelligence and providing all information requested, adding it was committed to addressing any questions from the authorities. Diageo DGE.L, also in a statement, said it is cooperating with Indian authorities, and has always complied with local laws. In its stock exchange disclosure, it said it had provided all documents and clarifications.

The Indian revenue directorate did not respond to a request for comment.

Reuters is first to report that tax inspectors visited Pernod's India office, and publish details of the probe, including that it is linked to the UK-India tariff declarations.