Tribunal stays Customs demand on Hewlett-Packard for $386mn

The Indian unit of US-based computer and printer maker Hewlett-Packard has obtained a stay on a Customs Department order asking it to pay $386 million (approximately Rs2252 crore) 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), the company said today.

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

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

When contacted by PTI, a Hewlett-Packard spokesperson said the firm does not agree with DRI's investigation or the commissioner's order.

"The orders passed on 11 April and 20 April 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 $370 million-plus penalties."

Prior to the issuance of the show cause notices, HP said it had deposited approximately $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 $70 million with the authorities.

"On 11 April 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 $386 million, of which HPI had already deposited $9 million.

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

It added, "On 20 April 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 $17 million, of which HPI had already deposited $7 million.

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