Hyundai in tax net! DRI claims duty dues of Rs 87 crore from the company

The South Korean carmaker, Hyundai Motor Company, took machines from one vendor to another without prior approval from authorities concerned and this landed the company with a tax bill of Rs 87 crore.

As a result, the Department of Revenue Intelligence (DRI) has claimed duty dues of Rs 87 crore from the company for allegedly violating rules of the export promotion scheme.

The company’s plant in Chennai can import machines at zero customs duty under the Export Promotion Capital Goods Scheme. In return, it needs to export cars worth six times the value of the duty saved within six years.

The duty exemption is subject to conditions, including prior authorisation to move machines from one vendor to another.

This year, Hyundai changed the vendor making door handles as it found the existing supplier was providing substandard products to the South Korean company.

"In a month, Hyundai makes 50,000 cars at the Chennai factory. If a machine breaks down in the middle of the night and if I had to get the necessary clearances before moving, Hyundai will take a production cut of 2,000 cars a day. The process of approval will take two months," said a Hyundai executive on condition of anonymity.

The company moved machinery to the new vendor for dies and moulds before obtaining prior approval as that would mean a production ramp down or a total stop for over 60 days.

While Hyundai eventually obtained approval for the new vendor, inspectors from the DRI spotted the shift and issued a show-cause notice a few months ago.

(Image: Indiatimes)