Xiaomi moves Supreme Court against $72 million customs demand; notice issued
New Delhi: Supreme Court, Xiaomi Corp. In the appeal filed by , it filed a notice with the customs department, challenging a court decision stating that the company had evaded tariffs of approximately $72 million by excluding royalty payments from the value of imported goods.
A bench comprising Justice PS Narasimha and Justice Alok Aradhe issued notice to the customs department on February 23 regarding the plea. The written order has not yet been published.
In its oral observation, the court panel said, “Let a notification be made. Get instructions and write a short note explaining what happened.”
The Chinese multinational company approached the top court along with its former contract manufacturers, including Flextronics Technologies India Pvt. Ltd., a unit of US-listed Flex and Bharat FIH, a unit of Taiwan’s Foxconn.
They are challenging the decision of the Chennai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in November 2025, which upheld the inclusion of royalty payments in the assessable value of imported goods and permanent penalties.
Senior advocate Arvind Datar, counsel for one of the contract manufacturers, told the court that the decision would have “serious consequences” for contract manufacturers operating in India. The customs department objected, arguing that if such requests were widely considered, every contract manufacturer would seek a similar solution.
The dispute was filed by the Directorate of Revenue Intelligence (DRI) between April 1, 2017 and June 30, 2020 against Xiaomi Technology India Pvt. It stems from its investigation into imports by . Ltd and its four contract manufacturers Rising Star Mobile India, Flextronics Technologies India, Hi-Pad Technology India and DBG Technology India.
Authorities alleged that Xiaomi India has entered into copyright and licensing agreements with Qualcomm Inc., Qualcomm Technologies and Beijing Xiaomi for the use of intellectual property in manufacturing and selling mobile phones in India.
While royalties were paid, these were not disclosed to customs authorities and were not added to the assessable value of the imported components, resulting in underpayment of duty.
Three show cause notices were issued by the customs department in December 2021, alleging suppression and intentional misrepresentation.
Against these notifications, Xiaomi and its contract manufacturers appealed to CESTAT in Chennai and objected to the customs duty demand and penalties.
The court redetermined the value, approved the different tax with interest, and imposed penalties.
CESTAT upheld the ministry’s case, holding that the royalty payments were inherently linked to imported goods and that Xiaomi India was the “beneficial owner” of the components.
He rejected the argument that contract manufacturers operate on a manager-to-manager basis, instead characterizing them as largely gig workers. The court approved criminal liability but sent the matter back for redetermination of the amount.
While the CESTAT decision is being examined Mint does not specify the final penalty amount, Reuters reported that the alleged mission evasion amounted to approximately $72 million. According to Indian customs laws, if the decision is approved, this figure could exceed $150 million, taking into account interest and penalties.
An email query sent to Xiaomi India seeking its response remained unanswered till press time.
Xiaomi’s share in the Indian smartphone market has changed in recent years, according to the latest Counterpoint Research data. In Q4 2025, Xiaomi regained its leading position in India, narrowly ahead of rivals like Vivo and Samsung, with around 19% shipment market share.
Supriya Majumdar, partner at Elarra Law Firm, said, “The direct consequence of any adverse decision against Xiaomi will be a hefty payment that will far exceed their annual profits. The actual customs duty on every imported part used in assembly will be increased.”
The long-term impact may result in further reduction of market share in the Indian market and reduced competitiveness with rivals. This impact will also be passed on to manufacturers, who may have to justify the pricing of assembly services to account for built-in royalty risk.
According to Majumdar, industries that rely heavily on contract manufacturing and cross-border technology transfers will be watching this situation closely.
Automakers such as Samsung Electronics and Kia Corporation and Volkswagen, which run full OEM models and pay significant royalties for software, navigation and safety systems, could face higher customs exposure if such royalty payments are to be included in the value of imports.
