Hours after the Enforcement Directorate (ED) seized Rs 5,551.27 crore of Xiaomi Technology India Private Limited lying in the bank accounts under the provisions of the Foreign Exchange Management Act (FEMA) in connection with the illegal outward remittances made by the company, Xiaomi said that as a brand it is committed to India and its operations are firmly compliant with local laws and regulations.

Xiaomi said in a statement that it is committed to working closely with government authorities to clarify any misunderstandings.

“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,” the company said in a statement.

On March 3, the Income Tax Department had said that it conducted raids against Chinese firms, which deal in telecom products, and learnt that the companies were involved in tax evasion through fake receipts.

The I-T Department had detected suppression of income of Rs 400 crore at that time. The raids were conducted in the second week of February across India, including the National Capital Region (NCR).

The searches had revealed that the Chinese firms had made inflated payments against receipt of technical services from its related parties outside India. The assessee company could not justify the genuineness of obtaining such alleged technical services in lieu of which payment was made, as also the basis of determination of consideration for the same.

The search action had further revealed that the firms had manipulated its books of account to reduce its taxable income in India through creation of various provisions for expenses, such as provisions for obsolescence, provisions for warranty, doubtful debts and advances etc., which have little or no financial rationale.

During the investigation, the groups had failed to provide any substantial and appropriate justification for such claims.