Home/ Companies / News/  'Committed to clarify misunderstandings': Xiaomi after ED seizes 5,551 cr asset over FEMA violation

Following Enforcement Directorate's claim that it has seized 5,551.27 crore from M/s Xiaomi Technology India Private Limited, the local arm of the China based gadget company, in connection with "illegal outward remittances made by the company", the company issued a statement.

“As a brand committed to India, all our operations are firmly compliant with local laws and regulations," the statement read clarifying the accounts and books of the company. 

The money was seized under the provisions of Foreign Exchange Management Act, 1999 (FEMA) was done after a probe was launched by the federal agency against the company in connection with alleged "illegal remittances" sent abroad by the Chinese firm in February.

“We have studied the order from government authorities carefully. We believe our royalty payments and statements to the bank are all legit and truthful. These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings," Xiaomi's statement further added.

Xiaomi started its operations in India in 2014 and started remitting the money from the next year, ED said in their statement.

Enforcement Directorate's accusation

"The company has remitted foreign currency equivalent to 5,551.27 crore to three foreign based entities which include one Xiaomi group entity, in the guise of royalty," the ED accused.

Such huge amounts in the name of royalties were remitted on the instructions of their Chinese "parent group" entities, it alleged.

"The amount remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities," the ED said.

It said while Xiaomi India procures completely manufactured mobile sets and other products from the manufacturers in India it has not availed any service from these three foreign based entities to whom such amounts have been transferred.

"Under the cover of various unrelated documentary facade created amongst the group entities, the company remitted this amount in guise of royalty abroad which constitute violation of section 4 of the FEMA," it said.

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Updated: 30 Apr 2022, 07:23 PM IST
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