Hewlett-Packard in India has been issued a show-cause notice to pay 14.5 billion Indian rupees (US$325 million) for evasion of customs duty, according to a statement on the Web site of the country's Ministry of Finance.

HP has been served the notice by India's Directorate of Revenue Intelligence (DRI), which usually investigates irregularities of a financial nature, such as contraband and customs duty evasion.

Hewlett-Packard India Sales undervalued products and spares, such as computers, that were supplied by HP entities abroad, the statement said.

The undervaluation went unnoticed for some time because HP India had been offered a "green channel facility" for faster clearance of imported goods without routine customs checks, DRI said.

Hewlett-Packard confirmed on Wednesday that it is under investigation, but said that it refutes the DRI's position, and will challenge its claims through the judicial process.

HP India has been "transparent" and has cooperated fully with the DRI in its investigation, the company said in a statement.

HP had the largest share of 16.2 per cent of the Indian PC market in the fourth quarter of last year, according to research firm IDC India.