Days after the Enforcement Directorate (ED) raids across offices of Chinese smartphone maker Vivo India, the Ministry of Finance has said that its directorate of revenue intelligence (DRI) has detected customs duty evasion of around ₹4,389 crore by Oppo Mobiles India Private Limited.

Oppo Mobiles India is a subsidiary company of Guangdong Oppo Mobile Telecommunications Corporation Ltd. It is engaged in the business of manufacturing, assembling, wholesale trading, and distributing mobile handsets and accessories across India. Oppo India deals in various brands of mobile phones, including Oppo, OnePlus and Realme.

"After completion of the investigation, a show-cause notice has been issued to Oppo India, demanding customs duty amounting to ₹4,389 crore. The said notice also proposes relevant penalties on Oppo India, its employees and Oppo China, under the provisions of the Customs Act, 1962," says FinMin. The ministry had issued a notice to the Chinese company on July 8, 2022, a government source told Fortune India.

During the investigation, the DRI conducted searches across the offices of Oppo India and the 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" to make mobile phones, found the DRI.

As per the ministry, this has resulted in "wrongful availment of ineligible duty exemption benefits" by Oppo India, amounting to ₹2,981 crore. During its probe, the FinMin wing officials questioned senior management employees and domestic suppliers of Oppo India. In their voluntary statements, they have accepted the submission of "wrongful description" before the customs authorities at the time of import, says the ministry.

The investigation also revealed that Oppo India remitted or made provisions for the payment of ‘royalty’ and ‘licence fee’ to various multinational companies, including those based in China, for proprietary technology/brand/IPR licence, etc. "The said ‘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, read with Rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007. The alleged duty evasion by M/s Oppo India on this account is ₹1,408 crore," says the ministry.

The company has deposited ₹450 crore as partial differential customs duty short paid by them, says the ministry.

Besides, the ED last week conducted raids across various locations of another Chinese smartphone maker Vivo and its associated companies. The probe agency has alleged the Chinese company "remitted" about ₹62,476 crore or about half of its total revenue in India to China in order to avoid taxes. The agency has seized multiple assets of the smartphone maker in India, including FDs, gold bars, and cash, under the PMLA (prevention of money laundering act) provisions.

Oppo India, however, says it has a different view on the charges mentioned in the SCN and that 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 the notice, presenting our side, and will be working further with the related government departments. OPPO India is a responsible corporate and believes in prudent corporate governance framework. OPPO India will take appropriate steps as may be needed in this regard including any remedies provided under the law,” says the company.

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