In yet another setback to Finnish handset maker Nokia, the Tamil Nadu government has slapped on it a Rs 2,400 crore (Rs 24 billion) tax demand notice related to the devices sold from its Chennai factory.
Nokia, which as part of its deal with the US-based software giant Microsoft has to transfer its Indian assets including the Chennai factory by March-end, today approached the Madras High Court challenging claims made by the Tamil Nadu government.
The development comes within a week of the Supreme Court refusing to lift restraint on sale of its Indian assets in a separate case related to payment of tax dues.
Tamil Nadu government's Commercial Taxes Department (VAT) have assessed sales tax on the devices sold from the firm's Chennai manufacturing facility.
According to sources, the government has claimed that the company is selling mobile phones in the domestic market instead of exporting them. They said the state government has sent a tax demand notice of about Rs 2,400 crore to the company in relation to this issue.
"Nokia has today filed a writ to the Madras High Court to contest a claim from the Tamil Nadu tax department, which has moved to assess sales tax on the export of devices from the company's Chennai facility," the company said in a statement.
Nokia considers the claim to be completely without merit and counter to domestic tax laws, it added.
"Nokia will defend itself vigorously in this matter. It is absurd that the Tamil Nadu tax authority is now claiming that devices made in Chennai were not exported and were instead sold domestically in India.
"We contend that this allegation has no basis in reality whatsoever; it could easily be rebuffed by a check of documentation provided to various governmental departments including Customs," the company said.
In India, exports are by law exempt from tax and Nokia has proved consistently that devices produced at Chennai are exported abroad, it added.
Nokia further said: "Indeed, the company has been regularly assessed and audited by the tax authorities since 2006 without incident, and it has also won numerous export awards from governmental organisations."
Last week, in a separate tax case, the Supreme Court had refused to lift restraint on sale of its Indian assets, including the Chennai plant, as part of the handset maker's global deal with the Microsoft.
The apex court dismissed Nokia's plea against the Delhi High Court order directing its parent company in Finland to give an undertaking to fulfil the conditions relating to payment of tax dues.
The apex court's decision not to interfere with the High Court order had put hurdles for Nokia's transferring its Chennai plant which is a part of the $7.2 billion global deal with Microsoft.