based on intelligence Xiaomi Technology India Pvt Ltd (Xiaomi India) was evading customs duty through devaluation, an investigation was launched by the Directorate of Revenue Intelligence (DRI) against Xiaomi India and its contract manufacturers.
During the investigation, searches were conducted at the premises of Xiaomi India by DRI, which resulted in the recovery of incriminating documents indicating that Xiaomi India, Qualcomm USA and Beijing Xiaomi Mobile Software Co. Ltd. royalty and license fee. contractual obligation.
Statements of key persons from Xiaomi India and its contract manufacturers were recorded, during which one of the directors of Xiaomi India confirmed the said payment.
During the course of the investigation, it further emerged that Xiaomi India has a partnership between Qualcomm USA and Beijing Xiaomi Mobile Software Co. Ltd., China (Related Party of Xiaomi India) was not being added to the transaction value. Goods imported by Xiaomi India and its contract manufacturers.
The investigation conducted by the DRI revealed that Xiaomi India is engaged in the sale of Mi brand mobile phones and these mobile phones are either imported by Xiaomi India or the mobile phone parts and components are supplied by the contract manufacturers of Xiaomi India. Imported and assembled in India. Mobile phones of the Mi brand manufactured by contract manufacturers are sold exclusively to Xiaomi India in terms of contract agreements.
Evidence collected during the investigation by the DRI indicates that neither Xiaomi India nor its contract manufacturer shall include the amount of royalty paid by Xiaomi India in the assessable value of goods imported by Xiaomi India and its contract manufacturers. which is a violation of section 14. Customs Act, 1962 and Customs Valuation (Determination of Value of Imported Goods) Rules 2007.
By not adding “royalty and license fee” to the transaction value, Xiaomi India was evading customs duty by being the beneficial owner of such imported mobile phone, its parts and components.
After completion of investigation by DRI, three show cause notices have been issued to Xiaomi India for demand and recovery of charges. 653 crore for the period from 1st April 2017 to 30th June 2020 under the provisions of the Customs Act, 1962.
“At Xiaomi India, we attach utmost importance to ensuring that we comply with all Indian laws. At present, we are reviewing the notice in detail. As a responsible company, we will support the authorities with all necessary documents,” said a Xiaomi India spokesperson.
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