The Indian unit of Chinese phone maker Oppo has been slapped with a notice of Rs. 4,389 crores of import duty evasion, the finance ministry said on Wednesday.
A show cause notice (SCN) was slapped against Oppo India on July 8 after documents were recovered during searches of its premises which indicated deliberate misrepresentation in the description of certain imports and the payment of royalties and license fees to various multinationals, including those based in China.
During an investigation of Oppo Mobiles India, a subsidiary of Guangdong Oppo Mobile Telecommunications Corporation, the Directorate of Tax Intelligence (DRI) detected customs fraud of around Rs. 4,389 crores, the ministry said in a statement.
Reacting to the development, Oppo India said it had a “different view” on the charges mentioned in the SCN and would take appropriate action, including legal remedies.
“We have a different view on the charges mentioned in the SCN. We believe this is an industry-wide issue that many companies are working on. Oppo India is reviewing the SCN received from DRI, and we will respond to the notice, presenting our side, and will work further with relevant government departments.
“Oppo India is a responsible company and believes in a prudent corporate governance framework. Oppo India will take appropriate action as may be necessary in this regard, including all remedies provided by law,” Oppo said in a response. by email.
Oppo India is engaged in the manufacturing, assembly, wholesale, distribution of mobile handsets and their accessories all over India. It sells various brands of mobile phones, including Oppo, OnePlus and Realme.
During the investigation, searches were carried out by the DRI at Oppo India’s office premises and at the homes of its key management employees, which led to the recovery of “incriminating evidence, indicating a false voluntary declaration in the description of certain articles imported for use in the manufacture of mobile telephones”. This misrepresentation resulted in the wrongful use of ineligible duty waiver benefits by Oppo India amounting to Rs. 2,981 crores.
Senior managers and domestic suppliers of Oppo India interviewed by DRI officers accepted the submission of the wrong description to customs authorities at the time of importation, the ministry said.
The investigation also revealed that Oppo India had remitted/arranged for the payment of “royalties” and “license fees” to various multinational companies, including those based in China, instead of using proprietary technology. /a trademark/an IPR license, etc.
The said “royalties” and “license fees” paid by Oppo India were not added to the transaction value of the goods imported by them, in violation of the provisions of the Customs Act. The alleged tax evasion by Oppo India on this account is Rs 1,408 crore.
The ministry further said that Oppo India voluntarily deposited Rs. 450 crore as partial differential customs duties paid by them.
“After the completion of the investigation, a show cause notice was issued to Oppo India demanding customs duty amounting to Rs. 4,389 crore. The notice also proposes relevant sanctions against Oppo India, its employees and Oppo China, under the provisions of the Customs Act of 1962,” the ministry said.
In December last year, the Income Tax Department also conducted raids on Chinese handset manufacturing companies, including Oppo, and their related persons and claimed to have detected alleged unrecorded income due a breach of Indian tax laws and regulations.