Xiaomi Technology India Pvt Ltd evades customs duty of Rs 653 crore: Finance Ministry

The Finance Ministry has said that gadget manufacturer Xiaomi Technology India Private Limited has evaded customs duty of Rs 653 crore. Xiaomi India sells products under the MI brand.

An investigation was initiated by the Directorate of Revenue Intelligence against Xiaomi India and its contract manufacturers. During the investigation, searches were conducted at the premises of Xiaomi India, which led to the recovery of incriminating documents indicating that Xiaomi India was remitting royalty and licence fees to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd. under contractual obligation. After completion of the investigation, three show-cause notices were issued to Xiaomi Technology India Private Limited for demand and recovery of duty amounting to Rs 653 crore.

Finance Ministry in a statement said, "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.

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 the value of imported goods) Rules 2007. 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.

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.