Posted by New Delhi: Xiaomi India has come under the scanner of the Directorate of Revenue Intelligence (DRI) for evading customs duty of Rs.653 crore by way of undervaluation.
After receiving information, the Directorate of Revenue Intelligence (DRI) initiated an investigation against Xiaomi India and its contract manufacturers.
Following the completion of the investigation, DRI issued three show-cause notices to M/s. Xiaomi Technology India Private Limited for demand and recovery of duty amounting to Rs. 653 crore for the period 01.04.2017 to 30.06.2020, under the provisions of the Customs Act, 1962.
“Based upon an intelligence that M/s Xiaomi Technology India Private Limited was evading customs duty by way of undervaluation, the DRI initiated an investigation against the company and its contract manufacturers,” according to the Press Information Bureau statement.
During the investigation, DRI conducted searches at Xiaomi’s India premises, which led to the recovery of incriminating documents indicating that it was remitting royalty and licence fees to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., under contractual obligation.
The officials have record statements of key persons of Xiaomi’s India unit and its contract manufacturers. And during which, one of the company directors has confirmed the said payments.
The Indian unit of the Chinese brand is accused of not adding the “royalty and licence fee” it paid to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd China in the transaction value of goods imported.
“During the investigations, it further emerged that the “royalty and licence fee” paid by Xiaomi India to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., were not being added in the transaction value of the goods imported by the company and its contract manufacturers,” revealed in the statement.
The DRI conducted investigations further showed that Xiaomi India is engaged in the sale of MI brand mobile phones either are imported or assembled in India. The company’s contract manufacturers import parts and components of mobile phones by the company’s contract manufacturers.
The contract manufacturers make the MI brand mobile phones, which as sold exclusively to Xiaomi India as per the contract pact.
During the investigation, DRI gathered evidence, which indicated that neither the company nor its contract manufactures were including the royalty amount paid in the assessable value of the goods imported by the company and its contract manufacturers.
This is in violation of Section 14 of the Customs Act, 1962 and Customs valuation (determination of the value of imported goods) Rules 2007.
The company was evading customs duty by not adding “loyalty and licence fee” into the transaction value. And being the beneficial owner of such imported mobile phones, the parts and components thereof.