By Arpan Chaturvedi
NEW DELHI: Contract manufacturer Flex is asking India’s Supreme Court to overturn an Indian Tax Tribunal order relating to the tax authorities payment dispute with Chinese smartphone maker Xiaomi, a court filing from Flex, seen by Reuters, showed.
Xiaomi has been asked to pay $72 million in unpaid taxes on royalties, but it has challenged this at the Supreme Court in a case seen as a test of the country’s legal framework for contract manufacturing.
Flex is asking the Supreme Court to strike down the Indian Tax Tribunal order, which said Xiaomi’s contract manufacturers “willingly participated in the layering of transactions facilitating the evasion of taxes,” Flex’s court filing showed.
U.S.-listed Flex told India’s Supreme Court it did not help Chinese smartphone maker Xiaomi to undervalue certain imports into India, the court filing showed.
Flex’s court filing said the Indian Tax Tribunal ruling could expose the contract manufacturer to “extremely harsh penalties.”
Flex in India and Xiaomi did not immediately respond to requests for comment. India’s customs authorities did not respond to requests for comment.
Flextronics Technologies India, a subsidiary of Flex, was not “involved in any manner in the transaction pertaining to royalty,” the company told the court in its January 16 filing, which is not public but has been reviewed by Reuters.
Xiaomi has said the implications of the tribunal’s ruling are far-reaching as they indicate “an implicit mistrust of the entire contract manufacturing industry” in the country.
In its Supreme Court challenge, Xiaomi argued that the tax tribunal erred by saying it was the “beneficial owner” of the components while requiring it to pay tax on the royalties.
The Supreme Court on Monday asked the Indian government to respond to the legal challenges and it will take up the case next in April.
