Akzo Nobel India Limited , a prominent player in the Indian paint and coatings industry, has secured a significant legal victory against the Central Excise and Service Tax Department, Mohali. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Chandigarh has completely set aside a tax demand of INR 11.19 lakhs, including interest and penalties, in a ruling that marks a favorable outcome for the company.

Background of the Dispute

The case dates back to March 2021 when the Central Excise and Service Tax Department, Mohali, issued a demand order against Akzo Nobel India. The department alleged improper utilization of Education Cess and Secondary Higher Education Cess during the period 2015-2017 under the Cenvat Credit Rules, 2004. The original tax demand amounted to INR 5.58 lakhs, with additional interest and penalties bringing the total to INR 11.19 lakhs.

CESTAT's Ruling

In response to Akzo Nobel India's appeal, CESTAT Chandigarh thoroughly reviewed the company's submission and supporting documents. The tribunal's decision was unequivocally in favor of Akzo Nobel India. The appeal order completely annulled the original demand, including all associated interest and penalties.

Financial Implications

The ruling provides Akzo Nobel India with total relief of INR 11.19 lakhs, plus any additional interest that may have accrued. This decision not only eliminates the immediate financial burden but also sets a precedent that could be beneficial for the company in any similar future disputes.

Company's Disclosure

In compliance with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Akzo Nobel India promptly disclosed this development to the stock exchanges. The company's filing detailed the chronology of events and the outcome of the appeal, demonstrating its commitment to transparent communication with stakeholders.

Conclusion

This legal victory for Akzo Nobel India underscores the importance of due process and the right to appeal in tax matters. It also highlights the company's effective management of legal challenges, which can have significant implications for its financial health and reputation in the market. As the litigation concludes in Akzo Nobel India's favor, it marks a positive resolution to what could have been a protracted legal battle, allowing the company to focus on its core business operations without the overhang of this tax dispute.

Akzo Nobel India Limited , a leading paint and coatings company, reported a 4% decline in revenue for the first quarter, with flat volumes. The company attributed the decline to various factors, including the impact of its ongoing strategic review process.

Decorative Paints and Coatings Performance

The decorative paints business experienced a decline marginally higher than the company average. Meanwhile, the coatings business, which had previously been growing at high single digits, saw a low single-digit growth in Q1.

Margin Pressure and Business Mix

Gross margins faced dilution due to a shift in business mix towards lower-margin segments, particularly in coil coatings. The company's vehicle refinish business, known for its higher margins, remained flat during the quarter.

Strategic Investments and Digital Initiatives

Despite the revenue decline, Akzo Nobel India continued to invest in future growth. The company made significant investments in digital projects, focusing on lead management. These investments impacted EBIT and EBITDA in the short term but are expected to drive both top-line growth and productivity improvements in the long run.

June Performance and Strategic Review Impact

June saw a significant decline in performance, which the company partly attributed to the ongoing strategic review process. Dealer apprehension regarding warranties and service continuity affected sales during this period. However, management reported a recovery in July following reassurance measures.

Business Composition and Employee Increments

Akzo Nobel India operates with an 80-20 retail-to-projects split in decoratives and an overall 57-43 paints-to-coatings ratio. The company implemented average salary increments of 6.50% for its employees during the quarter.

Powder Coatings Business Sale

The powder coatings business has been sold to AkzoNobel Global, with proceeds distributed as dividends to shareholders. This transaction will impact future financial reporting, with the September financials expected to include necessary disclosures as per listing regulations.

JSW Group Acquisition and Future Outlook

JSW Group's acquisition of Akzo Nobel India is expected to complete by December. Initially, both companies will run separately. The management aims for high single-digit growth, focusing on strengthening its market position and becoming one of the top two players in incremental growth.

Management Commentary

Rajiv Rajgopal, Chairman & Managing Director of Akzo Nobel India, commented on the quarter's performance: "We faced challenges in June due to the strategic review process, but we've seen a good bounce back in July. We're now focused on getting our revenue trajectory back and moving towards becoming the fastest-growing player in the market."

As Akzo Nobel India navigates through this transition period, the company remains committed to addressing customer issues, expanding its distribution network, and leveraging digital initiatives to drive future growth in the competitive Indian paint market.