New Delhi: The Union Ministry of Finance on Wednesday issued a notice of Rs 653 crore to Chinese phone maker Xiaomi’s India unit for alleged violation of Customs Act saying the company did not include royalty and licence fee in the value of its imports.
Moreover, a show-cause notice has also been issued to Xiaomi India following the recovery of documents during searches on its premises that indicated remittance of royalty and licence fee to US and Chinese firms under contractual obligations, the union finance ministry said on Wednesday.
Giving details, a Xiaomi spokesperson told a news agency, “At Xiaomi India, we give utmost importance to ensuring we comply 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 evidence collected during investigations by the Directorate of Revenue Intelligence (DRI) showed 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, the finance ministry said.
The Finance Ministry said being the beneficial owner of such imported mobile phones, Xiaomi India was evading customs duty by not adding royalty and licence fee in the transaction value.
“After 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 Rs. 653 crore for the period April 1, 2017 to June 30, 2020, under the provisions of the Customs Act, 1962,” the finance ministry said.
The probe further indicated 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.
During the investigation, searches were conducted by the DRI at the premises of Xiaomi India, which led to the recovery of incriminating documents indicating that Xiaomi India was remitting royalty and licence fee to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., under contractual obligation.
Statements of key persons of Xiaomi India and its contract manufactures were recorded, during which one of the directors of Xiaomi India confirmed the said payments.
