Centre slaps notice on Oppo for Rs 4,389 crore alleged import duty evasion

A probe by the Directorate of Revenue Intelligence (DRI) revealed that China’s smartphone maker Oppo had evaded customs duty worth Rs 4,389 crore in India.

It was the latest probe by India’s law-enforcing agencies into the business practice of the companies based in China after the two neighbouring nations got engaged in a military stand-off along the disputed boundary between them in eastern Ladakh in April-May, 2020. The military commanders of the two nations would hold another round of negotiation on July 17 to end the stand-off.

The DRI conducted raids in the offices of Oppo India (Oppo Mobiles India Private Limited), a subsidiary of Guangdong Oppo Mobile Telecommunications Corporation Limited of China. It also conducted raids on the residences of the top executives of the company in India. The raids led to the recovery of “incriminating evidence indicating wilful misdeclaration in the description of certain items” imported by the company for use in the manufacturing of mobile phones, according to an official statement issued by the Ministry of Finance in New Delhi on Wednesday.

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New Delhi made public the findings of the probe against Oppo just days after China’s Vivo had also been investigated by the Enforcement Directorate (ED) for alleged money laundering by the company’s subsidiary in India. Beijing had sharply reacted to the ED’s raids in the offices of ‘Vivo India’, a subsidiary of the Vivo Communication Technology Company Limited based in China.

The ED had claimed that its investigation found that Vivo India had illegally transferred nearly Rs 62,476 crore – almost half of its revenue – to China in order to avoid payment of taxes in India between 2017 and 2021. The probe agency had seized 119 bank accounts of Vivo India and entities associated with it with a gross balance of Rs 465 crore and approximately Rs 73 lakh in cash under the provisions of the Prevention of Money Laundering Act (PMLA). The Delhi High Court had later allowed Vivo India to operate the bank accounts on the condition that it would maintain a balance of Rs 250 crore in its accounts at all times.

China had last week demanded “a fair, just and non-discriminatory business environment” for its companies doing business in India. The frequent investigations by law-enforcing agencies into companies based in China and operating in India not only disrupt normal business activities and damage the goodwill of the companies but also impede the improvement of the business environment in India, a spokesperson of the communist nation’s diplomatic mission in New Delhi had stated.

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New Delhi, however, did not relent and its law-enforcing agencies continued investigation into the business practices of China's tech companies operating in India.

The DRI probe found that the misdeclaration by Oppo India had allowed it to wrongly avail duty exemption amounting to Rs 2,981 crore. The senior executives and domestic suppliers of Oppo India were questioned by the probe agency and they in their voluntary statements accepted the submission of wrongful description before the customs authorities at the time of import, according to the press release issued by the Ministry of Finance.

The investigation also revealed that Oppo India had remitted and made provisions for payment of ‘Royalty’ and ‘Licence Fee’ to various multinational companies, including the ones based in China, in lieu of the use of proprietary technology or brand or Intellectual Property Rights licenses. The ‘Royalty’ and ‘Licence Fees’ paid by Oppo India were not being added in the transaction value of the goods imported by them, in violation of Section 14 of the Customs Act, 1962, and Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007. The company thus evaded customs duty to the tune of another Rs. 1,408 crore.

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A sum of Rs 450 crore has been voluntarily deposited by Oppo India, as partial differential customs duty short paid by them, the Ministry of Finance stated.

The DRI served a “show cause” notice to Oppo India demanding customs duty amounting to Rs 4,389 crore. The notice also proposed relevant penalties on Oppo India, its employees and Oppo China, under the provisions of the Customs Act, 1962.