Xiaomi Challenges $72 Million Customs Demand in Supreme Court

Xiaomi Corp. Challenges Tribunal Ruling on Tariff Evasion

On 23 February, the Supreme Court of India issued a notice to the customs department in response to an appeal filed by Xiaomi Corp., a Chinese multinational company, challenging a $72 million tariff evasion ruling.

Background

The dispute stems from a Directorate of Revenue Intelligence (DRI) investigation into imports made by Xiaomi Technology India Pvt. Ltd and its four contract manufacturers between 1 April 2017 and 30 June 2020. Authorities alleged that Xiaomi India had entered into royalty and licence agreements with Qualcomm Inc. and Beijing Xiaomi for the use of intellectual property in manufacturing and selling mobile phones in India. However, royalties were not disclosed to customs authorities nor added to the assessable value of imported components, resulting in short payment of duty.

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Tribunal Ruling

In November 2025, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the inclusion of royalty payments in the assessable value of imported goods and sustained penalties. The tribunal ruled that royalty payments were intrinsically linked to the imported goods and that Xiaomi India was the "beneficial owner" of the components. The CESTAT also upheld penalty liability but remanded the matter for redetermination of quantum.

Implications

If the Supreme Court upholds the tribunal ruling, Xiaomi could face a heavy payout, far exceeding its annual profits. The effective customs duty on every imported part used in the assembly would stand raised, which could have a long-term impact on the company's market share in India and reduced competitiveness with rivals. Other companies that rely heavily on contract manufacturing and cross-border technology transfers, such as Samsung Electronics, Kia Corporation, and Volkswagen, could also face higher customs exposure if such royalty payments are required to be included in import value.

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Market Share

According to the latest Counterpoint Research data, Xiaomi regained a leading position in the India smartphone market in Q4 2025, with a 19% shipment market share. However, an adverse ruling against Xiaomi could erode its market share and reduce its competitiveness with rivals.