Vivo India Found Evading INR 2,217 Cr Custom Duty, Show Cause Notice Issued

Vivo India has found itself in more regulatory trouble in India as the Directorate of Revenue Intelligence (DRI) said that it has found the Chinese smartphone maker’s local unit to have evaded customs duty liability of around INR 2,217 Cr. The DRI has issued a Show Cause Notice to Vivo India as a result.

A press statement from the DRI read, “During the course of the investigation, searches were conducted by DRI officers at the factory premises of M/s Vivo India, which led to the recovery of incriminating evidence indicating willful misdeclaration in the description of certain items imported by M/s Vivo India, for use in the manufacture of mobile phones.”

According to the DRI statement, the misdeclaration was done by Vivo to get ineligible duty exemptions wrongfully, an amount totalling INR 2,217 Cr. The revenue intelligence department said that it has issued a Show Cause Notice to Vivo India, demanding the aforementioned customs duty.

For now, Vivo India has deposited INR 60 Cr towards the discharge of its differential duty liability.

The Chinese OEM has come under intense scrutiny ever since the Enforcement Directorate raided almost 50 of its locations across the country almost a month ago.

Subsequent investigation into Vivo India revealed that it remitted INR 62,476 Cr to entities outside the country, mainly in China, which reduced its tax liability in India significantly. The ED slapped money laundering charges on the local unit of the Chinese smartphone maker and froze its bank accounts, calling Vivo India’s actions an act of ‘financial terrorism’.

Vivo India, on its part, has denied its involvement in money laundering, calling ED’s actions “illegal, without jurisdiction and bad in law”. The case is being heard in Delhi High Court currently.

Interestingly, while the Chinese company said that the remittances had a “legitimate basis and were towards the procurement of raw material and other services required for the mobile manufacturing business of the company”, it does not explain the customs duty evasion alleged by the DRI. The company tried to explain away the remittances as payments toward imports, but the DRI has now alleged that Vivo India also skimped customs duty as well.

The continued persecution of Chinese companies in India has not gone down well in Beijing.

The spokesperson of the Chinese Embassy in India Wang Xiaojian reasoned that frequent investigations lead to poor goodwill, a sentiment echoed by Foreign Ministry spokesperson Zhao Lijian.

“China wishes the Indian side to investigate and enforce the law in compliance with laws and regulations, and effectively provide a fair, just and non-discriminatory business environment for Chinese enterprises to invest and operate in India,” Xiaojian said in July following the first raids on Vivo India’s offices.

New Delhi, on the other hand, is looking to press the issue. Informing the Parliament on Tuesday (August 2), the Union Finance Minister Nirmala Sitharaman said that the government is keeping an eye on the ongoing investigations into Vivo India, Xiaomi India and Oppo India, having issued them notices regarding tax evasion.

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