Xiaomi slapped with 653-cr notices for evading import duty: Finance ministry

The show-cause notices were issued under the provisions of the Customs Act, 1962, following the recovery of documents during searches on the company’s premises, the ministry said.
Representational image.(Bloomberg)
Representational image.(Bloomberg)
Updated on Jan 05, 2022 08:04 PM IST
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By, New Delhi

The Union ministry of finance said on Wednesday three show-cause notices worth 653 crore were slapped on Chinese phone maker Xiaomi's India unit Xiaomi Technology India for alleged evasion of import duty.

The show-cause notices were issued under the provisions of the Customs Act, 1962, following the recovery of documents during searches on the company’s premises that indicated remittance of royalty and licence fee to US and Chinese firms under contractual obligations, the ministry said in a statement.

It said an investigation was initiated by the Directorate of Revenue Intelligence based on an intelligence input that Xiaomi India was evading customs duty by way of undervaluation.

A company spokesperson said the government notice is being reviewed in detail and the authorities will supported with all necessary documentation.   

“At Xiaomi India, we give utmost importance to ensuring compliance with all Indian laws. We are currently reviewing the notice in detail. As a responsible company, we will support the authorities with all necessary documentation,” the spokesperson said.

According to a PTI report, evidence gathered during DRI’s investigations indicated that neither Xiaomi India nor its contract manufacturers were including the amount of royalty paid by the firm in the assessable value of the goods imported by the company and its contract manufacturers, which is in violation of the customs law.

By not adding "royalty and licence fee" in the transaction value, Xiaomi India was evading customs duty, being the beneficial owner of such imported mobile phones, the parts and components thereof, the ministry said.

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, China (related party of Xiaomi India) were not being added in the transaction value of the goods imported by the firm and its contract manufacturers.

It was also found that Xiaomi India is engaged in the sale of MI brand mobile phones and these mobile phones are either imported by the company or assembled in India by importing components of mobile phones by contract manufacturers of Xiaomi India.

The MI brand mobile phones manufactured by the contract manufacturers are sold exclusively to Xiaomi India, in terms of the contract agreement.

Statements of key persons of Xiaomi India and its contract manufacturers were recorded, during which one of the directors of Xiaomi India confirmed the said payments, it said.

(With inputs from agencies)

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Thursday, May 26, 2022