Chinese smartphone maker Xiaomi evaded customs duties of Rs. 653 crore in India, the Treasury Department said on Wednesday.
Based on a finding that M / s Xiaomi Technology India Private Limited (Xiaomi India) evaded customs fees through undervaluation, the Directorate of Revenue Intelligence (DRI) initiated an investigation against Xiaomi India and its contract manufacturers.
“After the investigation by the DRI was completed, M / s Xiaomi Technology India Private Limited were issued three notifications for the collection and collection of duties amounting to 653 billion rupees for the period from 04/01/2017 to 06/30/2020, under Provisions of the Customs Act 1962, “the Treasury Department said in a statement.
During the investigation, the DRI carried out searches on Xiaomi India’s premises, which resulted in the recovery of incriminating documents indicating that Xiaomi India had transferred royalties and royalties to Qualcomm USA and Beijing Xiaomi Mobile Software in accordance with contractual obligations.
“Statements from key people from Xiaomi India and its contract manufacturers were recorded in which one of the directors of Xiaomi India confirmed the said payments,” said the Ministry of Finance.
It also found that the “license fee” paid by Xiaomi India to Qualcomm USA and Beijing Xiaomi Mobile Software, China (related party of Xiaomi India) was not added to the transaction value of the contract manufacturers Xiaomi India and its imported goods, she added added.
The research carried out by the DRI also showed that Xiaomi India is engaged in the sale of MI branded cell phones and these cell phones are either imported by Xiaomi India or assembled in India through the import of cell phone parts and components by contract manufacturers of Xiaomi India.
The MI brand cell phones manufactured by the contract manufacturers are sold exclusively to Xiaomi India within the meaning of the contractual agreement.
The evidence gathered during the investigation by the DRI showed that neither Xiaomi India nor its contract manufacturers included the license amount paid by Xiaomi India in the assessable value of the goods imported by Xiaomi India and its contract manufacturers, contrary to Section 14. Violates the Customs Act 1962 and Customs Valuation (determining the value of imported goods) rules 2007.
By not including “royalties and royalties” in the transaction value, Xiaomi India avoided the customs fees, as it was the beneficial owner of such imported cell phones, their parts and components, announced the Ministry of Finance.
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