The City of New Delhi in India has banned AB InBev from selling its products in the city for three years for allegedly evading paying local excise taxes.

According to the government citation, a three-year investigation by the authorities allegedly found that SABMiller, which was acquired by AB InBev in 2016 used duplicate barcodes on its beer bottles supplied to city retailers that year, which allowed it to pay lower taxes.

“The barcodes were being duplicated by … SABMiller and supplied to the retail outlets to evade payment of excise duty,” said a 19-page order, dated July 16, which detailed the findings.

AB InBev denied the Delhi government accusations and said it would appeal.

The accusation follows a random inspection at a city bar in August 2016, which found amongst other things 12 beer bottles of SABMiller beer brands at the bar with identical barcodes with those found at the brewer’s warehouse.

A follow-on investigation by the authorities found that beer bottles sold to the same bar in November of the same year still had identical bar codes as the 12 bottles discovered in August.

A second citation by city authorities said that AB InBev should be put on a “blacklist” for three years, and also called for the sealing of two of its warehouses in Delhi, an action that a senior Delhi government official said had already been done.

“This means the company is debarred from Delhi market for all purposes, unless they appeal against this,” said the official, adding that no fresh stock of AB InBev beer brands can be sold at liquor shops or restaurants.

AB InBev argued that the issue could be due to technical or clerical error in the bar coding system and said it looked forward to receiving a fair hearing.

“Integrity and ethics are part of our core values … (We) look forward to presenting our views in full cooperation with the excise appellate process,” a company spokesman said.

According to IWSR, Drinks Market research firm, AB InBev is the second biggest player in India’s $7 billion beer market, accounting for a 17.5 percent market share.

A ban on the sale of the brewer’s products in Delhi would be a major setback for the firm.

“New Delhi remains an extremely critical market for any beer company … this is the country’s social capital, apart from Mumbai. It’s a showcase market for the premium beer portfolio,” said a former senior AB InBev executive, who declined to be identified.

The sale of alcohol in India is tightly regulated with, with most states individually regulating pricing and imposing taxes, which form a vital source of their revenues. Government rules mandate each beer bottle sold in the city has to have a unique barcode for track and trace purposes, and to ensure there is no duty evasion.

The Delhi government said it was “reasonable to believe” that the same barcodes were duplicated multiple times and supplied to various retail vendors in Delhi, adding that this amounted to the offence of selling non-duty paid liquor.

“The same barcodes were supplied twice at the same restaurant and hence the discrepancy could be noticed. Had the same been supplied to a different retail outlet the discrepancy could not have been noticed easily,” the citation said.

Source: Reuters, edited