Contract manufacturer Flex has moved the Supreme Court seeking to quash a Tax Tribunal ruling in Xiaomi’s royalty tax dispute. Xiaomi faces a 72 million dollar alleged unpaid tax demand, challenging it in a case crucial to India’s contract manufacturing framework.
NEW DELHI: Contract manufacturer Flex has petitioned India’s Supreme Court to set aside an Indian Tax Tribunal decision in the tax payment dispute involving Chinese smartphone maker Xiaomi, according to a court filing from Flex reviewed by Reuters.
Xiaomi has been ordered to pay 72 million dollar in alleged unpaid taxes on royalties, a demand the company has challenged at the Supreme Court in a case viewed as pivotal for the nation’s contract-manufacturing legal framework.
The document shows, in its filing, Flex seeks to set aside the Tax Tribunal’s finding that Xiaomi’s contract manufacturers “willingly participated in the layering of transactions facilitating the evasion of taxes,”
Flex, which is listed in the US, told the Supreme Court it did not assist Xiaomi in undervaluing certain imports into India, the court filing indicated.
The company warned that the tribunal’s ruling could subject the contract manufacturer to “extremely harsh penalties.”
Flex’s India unit and Xiaomi did not immediately reply to requests for comment, and India’s customs authorities also did not respond to inquiries.
Flextronics Technologies India, a Flex subsidiary, stated in its January 16 filing a submission not publicly available but reviewed by Reuters that it was not “involved in any manner in the transaction pertaining to royalty.”
Xiaomi has argued the tribunal’s decision has broad implications, saying it signals “an implicit mistrust of the entire contract manufacturing industry” in India.
In its Supreme Court appeal, Xiaomi contends the tax tribunal was wrong to treat it as the “beneficial owner” of the components while imposing tax liability on the royalties.
The Supreme Court asked the Indian government to file a response to the challenges; the case is scheduled for further consideration in April.
FOLLOW US FOR MORE LEGAL UPDATES ON YOUTUBE