New Delhi India January 5 ANI Chinese smartphone maker Xiaomi has evaded custom duty to the tune of Rs 653 crore in India, Finance Ministry said on Wednesday.
An investigation was initiated by the Directorate of Revenue Intelligence DRI against Xiaomi India and its contract manufacturers after an intelligence found that M s Xiaomi Technology India Private Limited was evading customs duty by way of undervaluation.
After the completion of the investigation by the DRI, three show cause notices have been issued to M s Xiaomi Technology India Private Limited for demand and recovery of duty amounting to 653 crore for the period 01.04. Finance Ministry said in a statement that the Customs Act, 1962, was in effect in 2020.
During the investigation, searches were conducted by the DRI at the premises of Xiaomi India and resulted in the recovery of incriminating documents indicating that Xiaomi India was remitting royalty and license fee to Qualcomm USA and Beijing Xiaomi Mobile Software Co. Ltd. under contractual obligation.
One of the directors of Xiaomi India confirmed the payments during a meeting of key persons of key people of the company's contract manufacturers, the Finance Ministry said.
The royalty and license fee paid by Xiaomi India to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., China related party of Xiaomi India were not included in the transaction value of the goods imported by Xiaomi India and its contract manufacturers during the investigations.
The investigations conducted by the DRI showed that Xiaomi India is engaged in the sale of MI brand mobile phones and these mobile phones are either imported by Xiaomi India or assembled in India by importing parts and components of mobile phones by contract manufacturers of Xiaomi India.
In terms of contract agreement, the MI brand mobile phones manufactured by the contract manufacturers are sold exclusively to Xiaomi India.
Evidence gathered during the investigations by the DRI indicated that neither Xiaomi India nor its contract manufactures included the amount of royalty paid by Xiaomi India in the assessable value of the goods imported by Xiaomi India and its contract manufacturers, which is in violation of Section 14 of the Customs Act, 1962 and Customs valuation determination of the value of imported goods Rules 2007.