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Microsoft, vendors probed for evasion

Microsoft, vendors probed for evasion
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First Published: Sat, Nov 22 2008. 12 04 AM IST
Updated: Sat, Nov 22 2008. 12 04 AM IST
Mumbai: The Directorate of Revenue Intelligence (DRI) in Mumbai has summoned Microsoft Corp. (India) Pvt. Ltd and seven software companies, and distributors that distribute Microsoft products in the country for alleged import duty evasion to the tune of Rs112 crore.
The firms are Tata Consultancy Services Ltd (TCS), CMC Ltd, Wipro Technologies, a division of Wipro Ltd, HCL Infosystems Ltd, Redington India Ltd, Ingram Micro Inc. and Softcell Technologies Ltd.
DRI, an agency that functions under the Central Board of Excise and Customs in the ministry of finance and deals primarily with violations of import law, has so far collected Rs48 crore from these seven firms for duty evasion.
According to DRI, these firms allegedly imported software from Microsoft Singapore Pte. Ltd between 2005-2006 and 2007-08 without declaring the correct value of the imports, thereby evading duty.
“These distributors did not disclose the full value of their transactions. They have imported software in the form of CDs and DVDs. While making payment for such software, they also needed to pay the licence fees. However, they evaded customs duty by not disclosing the licence fees to the customs authorities,” said a senior official of DRI, who did not wish to be named.
Under India’s valuation norms for imported products, the licence fees must be added to the value of the software.
“The companies have not paid the duty on licence fees paid for imported software. The value of licences for using the CDs and DVDs is 95% of the total import (cost),” said the official.
DRI had summoned Microsoft India officials on 13 October and asked some 17 questions on the violation of norms by its distributors.
The department started the investigation in June and in September it arrested Sunil Dalal, managing director of Softcell Technologies, a Mumbai-based software company and a distributor of Microsoft in the country, for import duty evasion to the tune of Rs25 crore. Dalal was later released on bail.
DRI questioned Ravi Venkatesan, chairman of Microsoft India, at its Mumbai office last month, said another official. Microsoft India declined to comment on the investigation. “We have no comments on this,” the company said in an email to Mint.
“Each of the seven distributors has paid 20-25% of the duty evaded by them. We are investigating the case and will issue show cause notices to these companies by December,” said the official, quoted in the beginning of the story.
In an email response, TCS said, “There is some inquiry going on with regard to import of Microsoft’s software in India. We have been advised by our legal advisers that there have been no irregularities committed in respect to such import.”
“The DRI investigation is on the valuation of the imported software sold to customers. The case is currently under representation and we are complying with the investigation requirements of DRI,” said Wipro.
A CMC spokesperson said: “This (issue) is regarding an interpretation of the law and if legal position so warrants, we will comply with the law. However, our legal experts are of the view that there is no duty payable (to the government).” S.V. Krishnan, chief financial officer of Redington India, said: “It’s just a classification issue. We have not misrepresented facts to evade customs duty. The category in which we had imported the software is legal.”
Emails sent to HCL Infosystems and Ingram Micro remained unanswered.
“Softcell has been fully cooperating with the DRI since the time the investigations started. The company has done no wrong. The methods and processes adopted by the company are based on sound legal advice and are consistent with the industry practices,” said D. Venkatesh, director of Softcell Technologies.
According to him, there is nothing illegal in the process adopted for the imports.
“We have neither misdeclared any information to customs nor misinterpreted the laws to deprive revenue to the government,” he said.
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First Published: Sat, Nov 22 2008. 12 04 AM IST