In its extensive 281-page appeal submitted to the Customs Excise and Service Tax Appellate Tribunal, the South Korean conglomerate contends that the Indian government was well-informed about the import classification practices in question. Samsung argues that Reliance Jio, the recipient of the imported equipment, had consistently employed the same classification method for similar imports between 2014 and 2017 without any prior issues raised by the authorities.
The contested components, identified as Remote Radio Heads, were imported from manufacturing hubs in Korea and Vietnam during the period spanning 2018 to 2021. Indian tax officials assert that these crucial 4G telecom components should have been subject to import tariffs ranging from 10 to 20 per cent.
The tax order, issued in January and now under appeal, accuses Samsung of evading customs duties through the alleged misclassification of these imports, which have a total declared value of $784 million. Beyond the significant $520 million tax claim, seven Samsung employees also face potential fines totaling $81 million. This escalates Samsung's total potential liability in this case to $601 million, a figure exceeding 60 per cent of the company's reported $955 million profit in India for the previous year.
Samsung's defense rests on the argument that Indian tax officials were "fully aware" of the classification methodology used. In its filing dated April 17th, the company stated, "The classification adopted by the appellant (Samsung) was known to the authorities, however the same was never questioned … Department was fully aware." Furthermore, Samsung claims that Reliance Jio failed to communicate a tax warning issued by authorities in 2017. The filing explicitly states, "Reliance Jio officials did not inform" Samsung of this critical communication.
This legal tussle adds to a growing trend of tax-related disputes between foreign corporations and Indian tax authorities. In a parallel development, German automotive manufacturer Volkswagen is also contesting a record $1.4 billion tax demand in India, facing similar accusations of misclassifying imported components.
Both India's tax department and Samsung have declined to offer any official comments on the ongoing case, while Reliance Jio has also not responded to media inquiries regarding the matter.
Adding another layer to its defense, Samsung has accused the Indian authorities of acting with undue haste and failing to provide the company with a fair opportunity to present its case, particularly given "the huge stakes involved."
This case underscores the broader regulatory uncertainties prevalent within India's rapidly evolving electronics and telecommunications sectors, especially for multinational companies navigating the intricacies of complex import regulations and tax policies. The outcome of Samsung's appeal could have significant implications for foreign investment and regulatory clarity in these key sectors of the Indian economy.