The Directorate of Revenue Intelligence (DRI) has initiated an investigation into Xiaomi Technology India Private Limited (Xiaomi India), alleging that the smartphone-manufacturing company has evaded customs duty of Rs 653 crores, according to a press release.
The ‘royalty and licence fee’ that Xiaomi India had paid to Qualcomm USA and to Beijing Xiaomi Mobile Software was not added to the transaction value of goods imported by Xiaomi India and its contract manufacturers, the release stated.
Chinese smartphone makers and apps have been under the scanner of the Indian government ever since reports alleged that Xiaomi smartphones send data to Chinese service providers and have a built-in capability to censor certain phrases.
Violation of Section 14 of the Customs Act: DRI
Since neither Xiaomi India nor its contract manufacturers included the royalty amount Xiaomi had paid to the two companies, the DRI said that it was a violation of Section 14 of the Customs Act, 1962 and Customs Valuation (determination of value of imported goods) Rules, 2007.
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 01.04.2017 to 30.06.2020, under the provisions of the Customs Act, 1962 — press release
DRI claimed that it had recorded statements of key persons of Xiaomi India and its contract manufacturers. One of the directors allegedly confirmed these royalty payments.
MeitY sends notice to Xiaomi India, seeking details of phones and components
Recently, it was reported that the Ministry of Electronics and Information Technology (MeitY) sent notices to OnePlus, Xiaomi, Vivo, and Oppo last week seeking details about their phones and components.
The notices came after Economic Times reported that the government is considering mandating a teardown or in-depth testing of smartphones and installed apps to check for potential snooping of citizens. Such rules could mirror the government’s requirements for telecom equipment, the ET report said.
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