Oppo India is doing away with the Chinese layer in the local distribution network, which the handset maker had set up when it began operations. The company is shuffling its channel management to sell its smartphones directly to local distributors, says a report by The Economic Times.

Oppo India’s decision to do away with the Chinese layer of the local distribution network comes amidst increased government scrutiny on Chinese smartphone makers such as Oppo and Vivo for operating through their Chinese partners for distribution. India has been pushing the Chinese handset brands to use only local distributors, the ET report added.

In July last year, the Directorate of Revenue Intelligence (DRI) slapped a Rs 4,389 crore show cause notice on Chinese smartphone maker Oppo India for allegedly evading customs duty by wrongfully availing exemption benefits. The Chinese company deals in mobile brands such as Oppo, OnePlus, and Realme.

During an investigation of Oppo Mobiles India Private Limited, a subsidiary of Guangdong Oppo Mobile Telecommunications Corporation Ltd – China (Oppo China), the DRI has detected Customs duty evasion of around Rs 4,389 crore, the Finance Ministry said on Wednesday.

During the probe, searches were conducted by the DRI at the office premises of Oppo India and residences of its key management employees, which led to the recovery of incriminating evidence, indicating wilful misdeclaration in the description of certain items imported by Oppo India for use in the manufacture of mobile phones.

The investigation also revealed that Oppo India had remitted/made provisions for payment of ‘royalty’ and ‘licence fee’ to various multinational companies, including those based in China, in lieu of the use of proprietary technology/brand/IPR license etc.

The said ‘royalty’ and ‘licence fees’ paid by Oppo India were not being added to the transaction value of the goods imported by them, in violation of provisions of the Customs Act. The alleged duty evasion by Oppo India on this account is Rs 1,408 crore.