| Date: |
31-07-2015 |
| Subject: |
Global FMCG companies under DRI lens for duty evasion |
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NEW DELHI: Leading multinational consumer durable companies face hundreds of crores of rupees in penalties for the alleged abuse of India's trade treaties, reflecting some of the hurdles these accords pose to Prime Minister Narendra Modi's ambitious Make in India plan.
The Directorate of Revenue Intelligence (DRI) has unearthed what officials described as a ruse to wrongfully claim duty benefits under the India-Asean Free Trade Agreement (FTA). Toshiba, Haier and a leading Japanese company are under the DRI scanner, officials said. Toshiba India faces a Rs 100 crore show cause notice, they added. It has already deposited this amount, the source said.
Chinese consumer goods maker Haier paid duties due with interest and penalties of about Rs 26 crore, helping it escape prosecution. Toshiba India said it is extending full support to the authorities but the issue concerns the whole industry. "Though the issue pertaining to the inquiry by the DRI is an ongoing matter which has been faced by many companies in the industry, Toshiba India, as a responsible and law-abiding corporate citizen, is extending full support and cooperation to the authorities," it said in response to queries from ET.
Haier did not respond to questions. ET has learnt that another big consumer electronics company is also being examined for such violations. The DRI probe against Toshiba pertains to alleged fudging of cost data, tampering with import invoices and mis-declaration to avail of concessional duty benefits under the free trade accord. It also faces allegations that it wrongfully availed of lower duty by importing full TV in semiknocked down (SKD) condition by misdeclaring them as parts to evade duty, according to two sources aware of the case.
Under the accord, concessional duty is applicable to goods manufactured in the Asean region. Under the India-Asean FTA, LCD panels, which constitute 80 per cent of a TV's cost, attract nil duty, other parts 4 per cent. Basic Customs duty on CTV is 10 per cent. However, the importing entity has to ensure that products that don't originate from any Asean country have value addition of not less than 35 per cent with a change in tariff sub-heading at the six-digit level. This essentially means the final product exported from an Asean country to India is classified differently from products that were used in its manufacturing and final production process as carried out by the exporter.
A nearly similar dispensation exists in the case of the India-Thailand FTA early harvest scheme. The investigation by Indian authorities covered the Indonesia manufacturing facility of the company. It brought to light how the value of parts that were shown to be from Japan were shipped from China and then to Indonesia on a suppressed invoice to meet the value addition norm of 35 per cent and then shipped to India in a ready assembly state.
The suppressed value in Indonesia raised a red flag as the company could show much higher profits for the unit than the industry average. DRI has alleged that it uncovered the practice by following emails among company's employees in India, Indonesia and Japan.
"Emails were sent on how the components and LCDs needed to be exported in different containers with separate documents to avoid higher duty on SKD kits... Detailed presentations were sent out to HQ on how the model could save costs," said an official. Almost the same method is alleged to have been used by Haier.
Source : economictimes.indiatimes.com
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