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Hyundai, associate firm under DRI, customs lens

Hyundai, associate firm under DRI, customs lens
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First Published: Tue, Jul 12 2011. 12 15 AM IST
Updated: Tue, Jul 12 2011. 12 15 AM IST
New Delhi: Hyundai Motor India Ltd (HMIL), the country’s largest car exporter, and a local subsidiary of its South Korean parent, Mobis India Ltd, have come under the scanner of the customs department and the Directorate of Revenue Intelligence (DRI) after they were allegedly found violating customs rules in the country.
This could lead to their Accredited Clients Programme (ACP) status being temporarily revoked for this year, said two officials familiar with the development independently. Those on the ACP list get their imports cleared faster by the customs department.
While HMIL has denied any wrongdoing, Mobis India did not respond to repeated queries.
DRI issued an alert to its various offices in December, asking officials to keep “a close watch” on Hyundai. DRI issued the alert after it allegedly found the Chennai-based company importing automobile components through “misdeclaration” and fined the South Korean automobile giant Rs 8.64 crore.
Mint has reviewed a copy of DRI’s alert issued on 8 December.
“Hyundai Motor India has been resorting to misdeclaration of the value of automobile components imported by them for manufacturing of motor vehicles. The modus operandi was to declare different prices for the same item with same part number in same invoice and bill of entry,” the alert said.
It further said that HMIL admitted to this during the investigation and was fined Rs 8.64 crore for 2008-10. DRI added that “this is suspected to be going on since November 2005”.
It added that all DRI offices had been alerted to monitor “all activities of Hyundai Motor India and similar companies”. The car maker rejected the allegation made in the DRI alert.
HMIL “totally denies the allegation of resorting to misdeclaration of the value of components imported by it for the manufacture of passenger cars and refutes having admitted the same,” R. Sethuraman, senior vice-president (finance and corporate affairs), said in a written response to questions. “HMIL imports all the components based on the transaction value and the relevant duty has been paid to the appropriate authorities with full documentation.”
Sethuraman also said: “DRI appears to be currently in the process of investigating Hyundai Motor India’s valuation of imported component(s) utilized for the manufacture of passenger cars. It is our submission that the subject matter is in the process of DRI investigation and HMIL is fully cooperating with DRI.”
The Mobis India case relates to a break-in at the customs dockyard and the illegal removal of automobile components held back by customs, two DRI officials and four customs officers said independently. All the officials declined to be identified.
However, the customs department did not file a formal complaint with the local police. The officials didn’t say why this wasn’t done.
Mobis imports critical components for HMIL, which manufactures 600,000 cars annually at its plant in Sriperumbudur near Chennai.
Mobis subsequently issued a letter of apology to the customs department, which was reviewed by Mint. The company said it had to take away the goods as inventory was running low and this could have stalled production at HMIL’s plant, which exports 1,000 cars a day.
The sequence of events that led to the alleged break-in began with the customs department refusing to release 11 containers of Mobis due to port congestion in the first week of April.
A second customs official said that according to customs rules, consignments could only be released together, while the company insisted on part release. The break-in followed this.
Separate emails sent to Mobis India on Friday, followed by text messages and phone calls requesting comment did not elicit a response.
A senior customs official said on condition of anonymity: “Only six out of 11 containers arrived on time due to port congestion. They had requested to release six containers, which was not possible due to the norms we follow. In the night they broke (open) one of the containers in our godown and took the stuff away. Next morning they admitted the crime.”
He declined to be named, citing the sensitivity of the matter.
According to the official, the Chennai customs circle is likely to write to the Central Board of Excise and Customs (CBEC), asking the apex body to revoke the ACP status of the company. “We will not assume that those are auto components and ignorance of law cannot be held as an excuse,” this official said.
Another customs official familiar with HMIL’s investigation said: “Investigations have been completed and a show-cause notice to the company will be sent in a week’s time.”
An ACP company has several privileges. Imports are fast-tracked, with few routine checks. One of the officials cited above said: “We release the consignments of ACP listed company in a day. Otherwise it could take up to three-five days.”
ACP accreditation is given to companies that have imported goods valued at Rs 10 crore in the previous fiscal, or paid more than Rs 1 crore customs duty in the previous fiscal.
“Many importers can meet the above criteria, yet only around 232 importers have so far obtained recognition under ACP. The reason is that ACP recognition is available only to importers who have not received any show-cause notice proposing penalty under the customs, excise, service tax or any allied laws,” said T.C.P. Rajagopalan, an independent trade consultant. “Also, no duty demands should be pending against the applicant on account of non-fulfilment of export obligation. These conditions are so onerous that only a few meet the eligibility criteria.”
The programme was introduced in 2005 to give speedier clearance at all electronic data interchange-enabled customs stations for imports.
In most cases, besides occasional random inspections, the customs department will accept the declared classification and valuation, and assess duty on the basis of importers’ self-declaration.
“It is learnt that a letter will soon be sent to the risk management division (RMD) in Mumbai, recommending the company (Mobis India) to be removed from ACP list,” said one of the customs officials cited above. The letter, once approved by RMD, will be sent to CBEC for further consideration.
The chief customs commissioner, Chennai circle, refused to comment on the matter.
HMIL’s Sethuraman said the company continues to avail of the ACP facility.
amrit.r@livemint.com
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First Published: Tue, Jul 12 2011. 12 15 AM IST
More Topics: Hyundai Motors | DRI | Mobis India | Customs | Auto |