India Clamping Down Chinese Companies In Corporate Stand-Off

The Directorate of Revenue Intelligence (DRI) has slapped a INR 4,389-crore show-cause notice on Oppo India for allegedly evading customs duty by wrongfully availing of exemption benefits.

Oppo India is a subsidiary company of China-based Guangdong Oppo Mobile Telecommunications Corporation and deals in mobile phone brands, including Oppo, OnePlus, and Realme.

The duty evasion was detected during searches conducted by the DRI — an anti-smuggling agency under the Central Board of Indirect Taxes and Customs — on the office premises of Oppo India and at the residences of its key management.

According to the finance ministry, the DRI found incriminating evidence, indicating ‘wilful misdeclaration’ in the description of certain items imported by Oppo India for use in the manufacture of mobile phones.

“This misdeclaration resulted in wrongful availment of ineligible duty exemption benefits by Oppo India, amounting to INR 2,981 crore,” the ministry stated on July 13, 2022.

The probe revealed that Oppo India had made provisions for payment of ‘royalty’ and ‘licence fee’ to various multinational companies, including those based in China, instead of using proprietary technology. Oppo India has voluntarily deposited a sum of INR 450 crore as partial differential Customs duty.

The Indian government has been cracking down on Chinese mobile manufacturing companies lately.

ED Vs Vivo

Earlier, Enforcement Directorate (ED) had raided a total of 48 location of Vivo and 23 entities associated with the company as a part of its investigation into the alleged money laundering case by the smartphone maker.

During its probe, the agency seized INR 73 lakh worth cash and 2kg gold bars. In addition to this, the department also said that it blocked 119 bank accounts pertaining to the company holding INR 4.65 billion or USD 58.76 million over the allegations that the company had remitted almost 50 per cent of its sales turnover in India.

ED Vs Xiaomi

In April this year, ED had seized funds worth INR 5551.27 crore of Xiaomi Technology India Pvt Ltd alleging that the company had violated foreign exchange regulations on the country. It said that the company has remitted foreign currency worth INR 5551.27 crore to three foreign-based entities which include one Xiaomi group entity in the guise of royalty starting 2015.

Huawei Vs IT Department

The IT department conducted raids at several office premises of Huawei in India. The department raided the company’s premises in Delhi, Gurugram, and Bengaluru as a part of tax evasion investigation. The officials reportedly looked at the company’s financial documents, account books and records as part of the investigation. At the time, Huawei had said that it was compliant with all the laws and that it would approach the related government department for more information and follow the right procedure.

Statement Of OPPO India

After the raid by DRI, Oppo India has come up with a statement said stated that the company believes the charges mentioned during the investigation by the DRI have been an “industry-wide issue” and it claims many corporations are working on the “structure of these payments”.

“We have a different view on the charges mentioned in the State Communication Network (SCN). We believe it’s an industry-wide issue many corporates are working on, said Oppo India spokesperson.

“OPPO India is reviewing the SCN received from DRI, and we are going to reply to the notice, presenting our side, and will be working further with the related government departments. OPPO India is a responsible corporate and believes in a prudent corporate governance framework. OPPO India will take appropriate steps as may be needed in this regard including any remedies provided under the law,” the company said.

Why This Is Happening

Though these investigation seem unrelated but they are not. In the heart of the matter lies the stand-off between the Indian Army and Chinese forces near the Line of Actual Control or LAC in Eastern Ladakh and clashes between the forces of the two countries at Galwan where 20 soldiers of Indian Army were killed in April 2020.

Ever since the standoff between the two countries, Indian government has increased its scrutiny over Chinese companies and their entities operating in India, which has resulted in these probes and investigations in India.