The Directorate of Revenue Intelligence (DRI) on Wednesday detected a Customs duty evasion of ₹4,389 crore by the Indian arm of Chinese smartphone-maker, Oppo.

In a statement, the agency said, the evasion was detected during an investigation pertaining to Oppo India, a subsidiary company of “Guangdong Oppo Mobile Telecommunications Corporation Ltd” (or Oppo China), China (hereinafter referred to as ‘Oppo China’).

Oppo India is engaged in the business of manufacturing, assembling, wholesale trading, distribution of mobile handsets and accessories thereof, across the country. It also deals in various brands of mobile phones, namely, Oppo, OnePlus and Realme.

‘Incriminating evidence’

Searches were conducted by DRI at the office premises of Oppo India and residences of its key management employees, which led to “recovery of incriminating evidence” that indicate “wilful mis-declaration in the description of certain items imported by Oppo India for use in the manufacture of mobile phones”.

“This mis-declaration resulted in wrongful availing of ineligible duty exemption benefits by Oppo India amounting to ₹2,981 crore,” the statement added.

Senior management employees and domestic suppliers of Oppo India were questioned, “who in their voluntary statements” accepted to submission of wrongful description before the Customs authorities at the time of import, it further said. 

Investigation has also revealed that Oppo India remitted and made provisions for payment of ‘Royalty’ and ‘Licence Fee’ to various multinational companies, including those based in China, in lieu of use of proprietary technology, brand, IPR license and so on. However, the said ‘Royalty’ and ‘Licence Fees’ paid by Oppo India were not being added in the transaction value of the goods imported by them. This was a violation of Section 14 of the Customs Act, 1962, and the alleged duty evasion by Oppo India on this account was ₹1,408 crore, the statement said.

A sum of ₹450 crore has been voluntarily deposited by Oppo India, as partial differential Customs duty short paid by them.

After completion of the investigation, a show cause notice was issued to Oppo India, on July 8, and it demanded the Customs duty of ₹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,” the statement said.

The Indian unit of another Chinese smartphone-maker, Vivo, is also facing government action.