Samsung Challenges $520 Million Tax Notice in India

Samsung, the leading South Korean Appliance & Consumer Electronics Producer, has urged an Indian tribunal to scrap a $520 million tax demand over alleged misclassification of telecom gear, reported Reuters.

The case concerns the company’s import of telecom equipment between 2018 and 2021. According to tax officials, the electronics major mislabelled these imports to reduce their customs duties to 10-20%, which has now resulted in a hefty penalty.

However, Samsung says it didn’t do anything wrong and was importing networking gear in the way Reliance was doing earlier.

In a recent appeal filed with the Customs Excise and Service Tax Appellate Tribunal (CESTAT) in Mumbai, Samsung argued that the authorities were thoroughly familiar with the way the company was importing its equipment in India. It also said that the same items had earlier been brought into the country by the leading telecom giant, Reliance Jio, without customs duty from 2014 to 2017. Here, the equipment imported to India is a small but crucial part of 4G mobile towers, called Remote Radio Head.

This electronic gear was imported from South Korea and Vietnam and sold to Reliance Jio. These gears are small in size but an important part of 4G mobile towers known as a ‘Remote Radio Head’.

In the process of investigation, Samsung India came to know that Reliance had received a warning in 2017 about a similar kind of import practice, but it neither shared this with Samsung nor the tax officials raised any concerns.

The company criticised the tax department and said that it wasn’t given enough opportunity to clarify its side, even though the stakes were huge.

Apart from the tax notice, the government has also fined seven Samsung employees around $81 million. However, it’s not yet clear whether the fined employees will fight the penalty separately or not.

Similar to Samsung, Volkswagen, a leading automaker recently took the Indian government to court over a $1.4 billion tax demand for a similar issue of misclassification of imported parts.

At the same time, investigators said in the January order that Samsung “transgressed all business ethics and industry practices or standards in order to achieve their sole motive of maximising their profit by defrauding the government exchequer.” the report mentioned.