IT Raids: Xiaomi India Fined Rs 653 Crore By DRI For Evasion of Custom Duty

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The department recovered some docuemnts from its premises which indicated remittance of royalty and licence fee to Qualcomm USA and to Beijing Xiaomi Mobile Software Co under contractual obligation

Following an intensive raid by the Income Tax department, Chinese electronics giant Xiaomi has been fined a Rs 653 crore notice for alleged evasion of import duty, the Directorate of Revenue Intelligence (DRI) said in a statement.

“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.

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The raid resulted in the department recovering some docuemnts from its premises which indicated remittance of royalty and licence fee to Qualcomm USA and to Beijing Xiaomi Mobile Software Co under contractual obligation, as per the DRI.

Evidence gathered during investigations by the Directorate of Revenue Intelligence (DRI) 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, the ministry said.
“By not adding “royalty and licence fee” into the transaction value, Xiaomi India was evading Customs duty being the beneficial owner of such imported mobile phones, the parts and components thereof,” the statement said.

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.
Xiaomi also broke its silence on the matter, wherein a spokesperson said, “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 investigations conducted by the DRI further 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.

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

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