DRI says Xiaomi evaded ₹653 cr of customs

Directorate of Revenue Intelligence (DRI) has stated that Xiaomi Technology India, the domestic arm of the Chinese tech major, has evaded customs duty to the tune of ₹653 crore between 2017 and 2020 by under-evaluation. The agency conducted raids against the smartphone manufacturer, where it found incriminating evidence in the matter, DRI said.

An investigation was launched against Xiaomi India and its contract manufacturers based on an intelligence report that the company was evading customs duty, DRI mentioned in a statement.

Searches were conducted by the agency at the company's premises, "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," DRI said. These payments were confirmed by one of the directors of Xiaomi India, the agency added.

It was found during investigation that Xiaomi India was not adding the royalty and licence fees paid to Qualcomm USA and to China's Beijing Xiaomi Mobile Software in the transaction value of the goods imported by the company and its contract manufacturers, DRI said.

Xiaomi India sells smartphones under the 'Mi' brand. 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 smartphones manufactured by the contract manufacturers are sold exclusively to Xiaomi India, in terms of the contract agreement.

"Evidence gathered during the investigations by the DRI indicated that neither Xiaomi India nor its contract manufactures were including 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 value of imported goods) Rules 2007," the agency stated.

"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," it further added.

Based on these facts that surfaced during the investigation, DRI has issued three show cause notices to Xiaomi Technology India Private Limited related to demand and recovery of customs duty amounting to ₹653 crore for the period 01.04.2017 to 30.06.2020, under the provisions of the Customs Act, 1962, the DRI said.