Chinese phone maker Oppo’s India unit has been slapped with a notice for alleged Rs. 4,389 crore import duty evasion, the Finance Ministry said on Wednesday.
A show-cause notice (SCN) has been slapped on Oppo India on July 8 after the recovery of documents during searches on its premises that indicated wilful misdeclaration in the description of some imports and remittance of royalty and license fees to various MNCs, including those based in China.
During an investigation of Oppo Mobiles India, a subsidiary of Guangdong Oppo Mobile Telecommunications Corporation, the Directorate of Revenue Intelligence (DRI) has detected Customs duty evasion of around Rs. 4,389 crore, the ministry said in a statement.
Reacting to the development, Oppo India said it has a “different view” on the charges mentioned in the SCN and will take appropriate steps, including legal remedies.
“We have a different view on the charges mentioned in the SCN. We believe it’s an industry-wide issue many corporates are working on. Oppo India is reviewing the SCN received from DRI, and we are going to reply to the notice, presenting our side, and will be working further with the related government departments.
“Oppo India is a responsible corporate and believes in the prudent corporate governance framework. Oppo India will take appropriate steps as may be needed in this regard including any remedies provided under the law,” Oppo said in an email response.
Oppo India is engaged in the business of manufacturing, assembling, wholesale trading, distribution of mobile handsets and accessories thereof across India. It deals in various brands of mobile phones, including Oppo, OnePlus, and Realme.
During the investigation, searches were conducted by the DRI at the office premises of Oppo India and residences of its key management employees, which led to the recovery of “incriminating evidence, indicating wilful misdeclaration in the description of certain items imported for use in the manufacture of mobile phones”. This misdeclaration resulted in wrongful availment of ineligible duty exemption benefits by Oppo India, amounting to Rs. 2,981 crore.
Senior management employees and domestic suppliers of Oppo India questioned by the DRI officers accepted the submission of wrongful description before the customs authorities at the time of import, the ministry said.
The investigation also revealed that Oppo India had remitted/made provisions for payment of ‘royalty’ and ‘licence fee’ to various multinational companies, including those based in China, in lieu of the use of proprietary technology/brand/IPR license etc.
The said ‘royalty’ and ‘licence fees’ paid by Oppo India were not being added to the transaction value of the goods imported by them, in violation of provisions of the Customs Act. The alleged duty evasion by Oppo India on this account is Rs 1,408 crore.
The ministry further said that Oppo India has voluntarily deposited Rs. 450 crore as partial differential customs duty short paid by them.
“After completion of the investigation, a show-cause notice has been issued to Oppo India demanding Customs duty amounting to Rs. 4,389 crore. The notice also proposes relevant penalties on Oppo India, its employees and Oppo China, under the provisions of the Customs Act, 1962,” the Ministry said.
In December last year, the Income Tax department too had conducted searches against Chinese handset manufacturing companies, including Oppo, and their linked persons and claimed to have detected alleged unaccounted income due to violation of the Indian tax law and regulations.