Sun Pharma slapped Rs 76 crore fine by customs authorities

The penalties arise from a dispute over the classification of imported goods, with authorities alleging the company misclassified products to avoid paying the correct duties.

The order, issued by the Office of the Commissioner of Customs (Imports) in Mumbai, highlights concerns about the company's compliance with customs regulations, especially under the provisions of the Customs Act, 1962.

According to the order, Sun Pharma is facing a redemption fine of Rs 27 lakh and a penalty of Rs 1.25 crore. Meanwhile, its subsidiary, Sun Pharma Laboratories Limited, is subject to a redemption fine of Rs 9 crore and a penalty of Rs 47.89 crore.

Additionally, three senior executives of the company, namely Nilesh Gandhi, Satish C. Jha, and Rajesh Wadhawa have each been imposed a fine of Rs 25 lakh. The total fines and penalties across the entities and individuals amount to more than Rs 76 crore.

The penalties were imposed following the reclassification of imported products from HSN 1302 (Extracts) to HSN 2106 (Food Supplements), which allegedly led to a shortfall in duty payments. The reclassification resulted in a demand for differential duties that Sun Pharma is said to have avoided by misclassifying the goods. The penalties are levied under sections 28(4), 125, 114A, and 112(a) of the Customs Act, which cover issues of misclassification, duty evasion, and improper importation.

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The misclassification in question is claimed to have led to an evasion of duties that would have otherwise been owed. The specific provisions cited in the order include;

1. Section 28(4): Relates to the recovery of duties that were not levied or were short-levied due to misclassification

2. Section 114A: Imposes penalties for intentional evasion of customs duties.

3. Section 112(a): Applies to individuals involved in improper importation or evasion of customs duties.

In response to the order, Sun Pharma assured its investors that the penalties would not have a material impact on the company's financial performance or operations. The company, in a statement to stock exchanges on November 26, 2024, noted that it was reviewing the order and would take the necessary steps to comply with the regulations.

Despite the significant fines, Sun Pharmaceutical maintains that the penalties will not affect its day-to-day business operations or long-term growth prospects. The company remains confident in its ability to navigate the issue and has committed to transparency and regulatory compliance as per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.