Our Bureau
Mumbai
Samsung has challenged a $520 million tax demand by Indian authorities over alleged misclassification of networking equipment imports sold to Reliance Jio, stating it is not the first time a company has used such import practices with Reliance Jio adopting the same from 2014 and 2017.
The South Korean conglomerate, in its 281-page appeal to the Customs Excise and Service Tax Appellate Tribunal (CESTAT) in Mumbai, argues that the disputed components — known as Remote Radio Heads — were imported from Korea and Vietnam between 2018 and 2021 and, according to the authorities, should have been taxed between 10 to 20 per cent. The equipment was later sold to Reliance Jio, the telecom company owned by Indian billionaire Mukesh Ambani.
In its legal filing, Samsung argues that Indian customs officials were fully aware of the classification all along. “The classification adopted by the appellant (Samsung) was known to the authorities, however the same was never questioned … Department was fully aware,” the company wrote in its April 17 filing to CESTAT, further claiming that Reliance Jio failed to inform Samsung of a tax warning issued in 2017.
On the other hand, the Indian authorities have alleged Samsung of evading customs duties by misclassifying the critical 4G telecom components, with a total import value of $784 million. The case involves fining seven Samsung employees with $81 million, increasing the total liability payable to $601 million, thus spiralling financial woes for the world’s leading electronics manufacturer. The total penalty is now more than 60 per cent of Samsung’s reported $955 million profit in India last year.
Samsung also slammed the tax department for rushing the case and not giving the company enough time to present its side of legal arguments. The January order demanding $520 million was passed “in a hurry,” Samsung said, adding that it was denied a “fair opportunity” to defend itself properly — especially considering what’s at stake.
The case highlights the complex regulatory norms to be adhered by multinationals in the electronics and telecom sectors in India, thus leaving them to grapple with economic uncertainties.
