By Aditya Kalra and Arpan Chaturvedi
NEW DELHI (Sazua.com) – Samsung has requested an Indian tribunal to invalidate a $520 million tax claim alleging improper classification of network equipment imports. The company contends that authorities were well-aware of this practice since India’s Reliance had been importing identical components using a comparable method for many years, according to official records.
Samsung has become the latest prominent international firm in recent months to contest an Indian tax claim.
Volkswagen has taken legal action against Prime Minister Narendra Modi’s administration due to an unprecedented claim of $1.4 billion for incorrectly categorizing its imported components.
In the Samsung case, tax officials requested in January that Samsung pay $520 million for allegedly avoiding 10-20% import duties by incorrectly categorizing shipments of essential mobile infrastructure gear. This equipment was subsequently supplied to billionaire Mukesh Ambani’s telecommunications company, Reliance Jio, between 2018 and 2021.
In its 281-page appeal submitted to the Customs Excise and Service Tax Appellate Tribunal in Mumbai, Samsung accuses Indian officials of being well-aware of the business strategy. It points out that Reliance had been importing similar equipment duty-free for three years up until 2017, establishing a precedent.
Samsung’s Indian subsidiary learned from a tax inquiry in India that Reliance had been alerted regarding this practice as early as 2017. However, Reliance failed to notify the South Korean firm of this information, and neither did the tax authorities question Samsung about it.
The categorization used by the appellant (Samsung), which was familiar to the authorities, was never challenged… The department had complete knowledge of this,” according to Samsung’s submission dated April 17. This document has not been made public but was reviewed by Sazua.com.
The statement also notes that Reliance Jio officials failed to notify Samsung regarding the tax warning issued in 2017.
Samsung and India’s tax authorities did not reply to queries from Sazua.com.
Additional specifics regarding Reliance’s 2017 alert from tax officials remain undisclosed and were absent from theSamsung submission. Reliance did not reply to inquiries made bySazua.com.
In addition to the $520 million demandSamsungis facing from India, authorities have also levied an$81millionfine againstsevenofitsemployees. This brings the overalltaxdemandto$601million. It remains unclear whethertheSamsungemployeeshave initiatedseparatechallengesagainstthefines.
The tax liability accounts for a significant portion of Samsung’s $955 million net profit from the previous year in India, where the company is among the top contenders in both the consumer electronics and smartphone sectors.
When justifying its tariff claims, Samsung asserts in its submission that the tax agency issued the directive in January hastily and did not offer them a proper chance to present their side of the story, even though significant consequences were at play.
The Samsung case revolves around the importation of a component known as the “Remote Radio Head,” which is essentially a radio-frequency circuit housed within a compact outdoor enclosure. According to tax authorities, this part is considered “one of the most crucial” elements in 4G telecommunications infrastructure.
The lawsuit accuses Samsung of incorrectly categorizing components imported worth $784 million from Korea and Vietnam between 2018 and 2021, with the aim of increasing their profit margins.
The investigators concluded that Samsung had violated every principle of business ethics and industry norms with the single aim of maximizing profits at the expense of deceiving the government treasury, according to the order issued in January.
(Reported by Aditya Kalra; Edited by Michael Perry)
