The US had complained to the WTO against the additional duties on imported liquor on March 2007. This was after the EU approached the world trade body on the issue in November 2006.

India levies 150 per cent basic Customs duty on imported liquor. The duty is compliant with WTO norms. On July 4, 2007, India slashed additional duties on imported liquor. Prior to this, the effective import duty was as high as 550 per cent. Following the cut, the EU suspended its complaint, but the US persisted.

"The case against the US is far from over," said Samir Gandhi, senior associate at the Delhi-based law firm, Economic Laws Practice, which defended India at the WTO.

The US, which is unhappy over the decision, is likely to appeal to the Appellate Body, the WTO top court, against the recommendations of the panel's report, which was released on June 9.

India has already started preparing for a possible appeal by the US. The US trade office has expressed its displeasure at the WTO panel's recommendations.

Even if the US does not appeal, the final word rests with the Dispute Settlement Board, which is a political body represented by 152 countries. "Only after the board accepts the panel's report will the recommendations have legal sanctity," said Gandhi.

India had also allowed reimbursement of special additional duty on imported wines and spirits sold for consumption within the country. The EU suspended the case against India but maintained that it would watch out for taxes imposed by state governments on imported liquor.

Meanwhile, the possibility of the EU opening up the case against India is also not being ruled out. Wine and liquor producers in Europe have complained to the European Commission about high state taxes in Maharashtra and Goa.

The Indian wines and spirits market has for long been on the radar of foreign players, who believe that the growing purchasing power is likely to increase consumption of imported liquor.

Brewers in Europe have estimated that Indians consume 87 million nine-litre cases of spirits and 667,000 nine-litre cases of wine every year.

Significantly, the panel's report has not made India entirely happy as it restricts its options for imposing additional duties equivalent to excise duties on imported liquor in the future.