Oppo India Found Evading Customs Duty Of Rs. 4,389 Crores: DRI

Leading Chinese smartphone companies are going through a rough patch in India. Oppo has become the third company under government scrutiny for evading customs duties after Xiaomi and Vivo. The Directorate of Revenue Intelligence (DRI) has detected Customs duty evasion of around Rs 4,389 crore by Oppo Mobiles India Private Limited, a government statement said on Wednesday.

According to the report, the Intelligence department conducted searches 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 by Oppo India for use in the manufacture of mobile phones.

The misdeclaration resulted in wrongful availment of ineligible duty exemption benefits by Oppo India amounting to Rs 2,981 crore. The Intelligence department questioned senior management employees and domestic suppliers of Oppo India, who in their voluntary statements accepted the submission of wrongful description before the Customs Authorities at the time of import.

“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 ministry said.

The report further mentions that the royalty and license fees paid by Oppo India were not being added to the transaction value of the goods imported by them. The alleged duty evasion by M/s Oppo India on this account is Rs. 1,408 crores. Oppo India has voluntarily deposited a sum of Rs 450 crore as partial differential Customs duty.

The Directorate of Revenue Intelligence (DRI) has issued a Show Cause Notice to Oppo India demanding Customs duty amounting to Rs. 4,389 crores. The said Notice also proposes relevant penalties on Oppo India, its employees, and Oppo China, under the provisions of the Customs Act, 1962.

There have been similar allegations against other Chinese smartphone makers, besides Oppo. Last week, the Enforcement Directorate conducted raided 48 locations of Vivo and related firms for a money-laundering investigation. Vivo’s top executives Zhengshen Ou and Zhang Jie are believed to have fled the country.

As per our sources, a case has been registered in Kalka Ji Police Station, New Delhi, and an investigation is under process. So far, ED has received information about money laundering worth Rs. 10,000 crores during the raids.

Chinese smartphone giant Xiaomi too has been under investigation for the past few months. In April, the agency said that the smartphone maker had transferred funds abroad illegally to three entities. One of them was a Xiaomi group entity and it was done in the disguise of royalty payments. The agency seized $725 million (approx. Rs. 5.6 crores) from Xiaomi’s local bank accounts. After the company filed a legal challenge, an Indian court stayed the decision.

In response to the allegations, Xiaomi said all royalty payments were legitimate and were for IPs and in-licensed technologies used in Indian products.

Despite such severe allegations, Chinese companies are constantly populating the market with new products. Xiaomi recently celebrated its 8th anniversary in the country and announced a host of AIOT products. Oppo is hosting a big launch event in the coming week to unveil its flagship Reno 8-series smartphones, new premium TWS earbuds, and a mid-range tablet.

Vivo will also unveil a T1X mid-ranger smartphone on July 20, 2022. It remains to be seen whether such tax evasions negatively impact Chinese companies’ image and sales in the country.