HP India wins stay on Custom Department's $386 million order

US-based Hewlett-Packard's (HP) India unit has won a stay against Customs Department order asking the computer manufacturer to pay USD 386 million in alleged duty evasion.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has stayed the Commissioner of Customs Bangalore's order against HP India Sales Private Ltd (HPI), HP said.

The case relates to an investigation by Directorate of Revenue Intelligence (DRI) in 2008, where the government agency had alleged that HPI had underpaid customs duties while importing products and spare parts into India.

In April last year, the Commissioner of Customs Bangalore had issued an order on the products show cause notice affirming certain duties and penalties against HPI and the named individuals of approximately USD 386 million.

When contacted, a HPI spokesperson said the firm does not agree with DRI's investigation as well as the commissioner's order.

"The orders passed on April 11, 2012 and April 20, 2012 by the Commissioner of Customs pertain to a DRI investigation which commenced in 2008. HP disagrees with the DRIs position and Commissioner's orders and has challenged the orders before CESTAT. The CESTAT has stayed the Commissioners orders until final disposal of the appeal," the spokesperson added.

In a regulatory filing to the US Securities and Exchange Commission, HP said "In April and May 2010, the DRI had issued show cause notices to HPI), a subsidiary of HP, seven HP employees and one former HP employee alleging that HP underpaid customs duties while importing products and spare parts into India and seeking to recover an aggregate of approximately USD 370 million, plus penalties."

Prior to the issuance of the show cause notices, HP said it had deposited approximately USD 16 million with the DRI and agreed to post a provisional bond in exchange for the DRI's agreement to not seize HP products and spare parts and to not interrupt the transaction of business by HP in India.

So far, HP has deposited about USD 70 million with the authorities.

"On April 11, 2012, the Bangalore Commissioner of Customs issued an order on the products show cause notice affirming certain duties and penalties against HPI and the named individuals of approximately USD 386 million, of which HPI had already deposited USD 9 million.

"On December 11, 2012, HPI voluntarily deposited an additional USD 10 million in connection with the products show cause notice," the filing said.

It further added: "On April 20, 2012, the Commissioner issued an order on the parts show cause notice affirming certain duties and penalties against HPI and certain of the named individuals of approximately USD 17 million, of which HPI had already deposited USD 7 million.

"After the order, HPI deposited an additional USD 3 million in connection with the parts show cause notice so as to avoid certain penalties."