Flex Appeals to India’s Supreme Court to Overturn Tribunal Ruling in Xiaomi Tax Dispute

Contract manufacturer Flex seeks to overturn an Indian tribunal ruling accusing it of helping Xiaomi evade taxes on $72 million in royalties.

By: AXL Media

Published: Feb 26, 2026, 8:16 AM EST

Source: The information in this article was sourced from Channel News Asia

The Core of the Dispute

The legal battle stems from a demand by Indian tax authorities for Xiaomi to pay $72 million in unpaid taxes on royalties. A recent Indian Tax Tribunal order exacerbated the situation by alleging that Xiaomi’s contract manufacturers were active participants in "layering transactions" to evade these taxes. Flex, a U.S.-listed manufacturer, is now fighting to have this specific language removed from the record, arguing that its subsidiary, Flextronics Technologies India, was never involved in the financial transactions pertaining to Xiaomi's royalties.

Implications for Contract Manufacturing

Xiaomi has voiced strong support for challenging the tribunal's findings, claiming the ruling reflects an "implicit mistrust" of the entire contract manufacturing industry in India. The tech giant argues that the tribunal erred in its assessment of "beneficial ownership" regarding imported components. For companies like Flex, the ruling creates significant legal and financial risk, potentially exposing them to penalties for tax discrepancies in transactions they claim were managed entirely by their clients.

A Broad Legal Test Case

This case has become a focal point for international businesses operating in India. As the country positions itself as a global hub for electronics manufacturing, the outcome will define the liability of third-party manufacturers in the tax disputes of their brand-name partners. If the Supreme Court upholds the tribunal’s view, it could set a precedent that requires contract manufacturers to take a more active and potentially costly—role in auditing the tax compliance of the companies they serve.