Chinese mobile maker Oppo India evaded customs duty worth Rs 4,389 cr: DRI

During the investigation, searches were conducted by DRI at the office premises of Oppo India and residences of its key management employees

The Directorate of Revenue Intelligence (DRI) has slapped a Rs 4,389-crore show-cause notice on Oppo India for allegedly evading Customs duty by wrongfully availing of exemption benefits.

Oppo India is a subsidiary company of China-based Guangdong Oppo Mobile Telecommunications Corporation and deals in mobile phone brands, including Oppo, OnePlus, and Realme.

The duty evasion was detected during searches conducted by the DRI — an anti-smuggling agency under the Central Board of Indirect Taxes and Customs — on the office premises of Oppo India and at the residences of its key management.

The searches led to recovery of incriminating evidence, indicating ‘wilful misdeclaration’ in the description of certain items imported by Oppo India for use in the manufacture of mobile phones, the finance ministry said on Wednesday.

“This misdeclaration resulted in wrongful availment of ineligible duty exemption benefits by Oppo India, amounting to Rs 2,981 crore,” the ministry stated on Wednesday.

The investigation has further revealed that Oppo India had remitted/made provisions for payment of ‘royalty’ and ‘licence fee’ to various multinational companies, including those based in China, instead of using proprietary technology, it added.

“The said ‘royalty’ and ‘licence fees’ paid by Oppo India were not being added in the transaction value of goods imported by them, in violation of Section 14 of the Customs Act, 1962. The duty evasion by the mobile maker on this account is Rs 1,408 crore,” the ministry added.

Oppo India has voluntarily deposited a sum of Rs 450 crore as partial differential Customs duty.

Of late, Chinese smartphone companies like Xiaomi, Oppo, and Vivo have come under the lens of Indian authorities.  

After completion of investigation, a show-cause notice was issued on Oppo India on July 8, seeking payment of Customs duty amounting to Rs 4,389 crore.

The said notice also proposes relevant penalties on Oppo India, its employees, and Oppo China under the Customs Act.

Oppo India is engaged in the manufacturing, assembling, wholesale trading, and distributing mobile handsets and accessories across India.

“Among others, senior management employees and domestic suppliers of Oppo India were questioned, who, in their voluntary statements, accepted the submission of wrongful description before Customs authorities at the time of import,” observed the ministry.

Multiple agencies have conducted searches on them and their distributors, along with linked associates, since December last year. The income-tax department had detected alleged unaccounted income worth over Rs 6,500 crore with these firms. The Enforcement Directorate, too, is probing the money laundering angle and the Foreign Exchange Management Act charges against Vivo and Xiaomi. 

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 THE CROSS HAIRS

• Directorate of Revenue Intelligence conducts searches on the premises of mobile company Oppo India
• Finds evidence of firm availing of duty exemption benefits to circumvent Customs duty
• Finds wilful misdeclaration of imported items used to manufacture mobile phones
• Senior management and domestic suppliers of Oppo India questioned, who in their voluntary statements accepted the submission of wrongful description before Customs authorities at the time of import
• Rs 450 crore has been voluntarily deposited by Oppo India as partial differential Customs duty
• Show-cause notice was issued on July 8