The Directorate of Revenue Intelligence (DRI) has issued show cause notices to leading camera makers Sony, Canon and Nikon for ‘artificially’ restricting memory of high-end digital cameras to avail zero duty benefit meant for low-end equipment.
“Notices have been issued for wrongfully claiming duty exemption,” said a DRI official. The agency has said that Sony, Canon and Nikon evaded customs duty to the tune of Rs 129 crore, Rs 161 crore and Rs 105 crore respectively.
While low-end cameras are exempt from duty, 10% Customs duty is levied on high-end digital cameras. A low-end camera is defined as a digital still image or video camera that is not capable of recording video with minimum resolution of 800×600 pixels at minimum 23 frames per second for at least 30 minutes in a single sequence using the maximum storage (including expanded) capacity.
If any one of the conditions is not satisfied, the camera will not be exempt from duty. At the heart of the dispute is the third condition, as per which, to avail the exemption there are two qualifiers to the recording time “in a single sequence” and “using the maximum storage.” This implies that to avail the exemption, the camera should utilize its full storage including the expanded capacity for a single clip length of not more than 30 minutes.
According to the DRI official, who did not wish to be named, importers declared that digital cameras imported by them cannot record more than 30 minutes in a single sequence. However, the importers had artificially restricted clip length to just below 30 minutes by in-built firmware loaded on the cameras. The fact that clip length is being artificially restricted through a software to less than 30 minutes and clips of less than 30 minutes can be recorded till the available storage capacity is exhausted was suppressed in the bill of entry at the time of import, the official said.
The three camera makers that together control 85% of the Indian market have, however, contested the allegations of tax evasion. Sony and Nikon have reached out to the authorities concerned, with the latter even open to taking a legal recourse. The companies had attempted to secure a stay against the notices, but the court favoured adjudication as per regular process.
Nikon India managing director Hiroshi Takashina said India is the only ITA member that imposes tariffs on imports of digital cameras, a claim authorities refute.”We strongly request to remove the import duty, which custom authorities have put from February 2014 onwards, to be rolled back to zero as earlier. Such a sudden change of putting 10% basic duty on import of digital camera is discouraging,” he said. Takashina refuted DRI’s charges and slammed its intent to recover duty retrospectively, from March 2012 onwards.
A Sony India spokesman said the exemption notification issued by customs is pursuant to the mandate of the Information Technology Agreement (ITA), to which India is a signatory. The ITA provides for participant countries to completely eliminate duties on IT products. “Sony has correctly has correctly availed the duty exemptions under the relevant notification. As we have already filed our response before the adjudicating authority and hearing is awaited, we are unable to discuss or comment on the matter, which is subjudice,” he said.
“We tried our best to approach the appropriate authorities and put our point forward with explanation; if this situation continues, we are very much ready to appeal this matter to the court until we get justice,” he said.