The Indian government has ordered Samsung and its executives in the country to pay USD 601 million in back taxes and penalties for allegedly misclassifying telecom equipment imports to evade tariffs, a government order reviewed by Reuters revealed. Samsung imported and sold these items to Mukesh Ambani's telecom company, Reliance Jio.
Investigation into Samsung
According to the report, the investigation into Samsung commenced in 2021 when tax inspectors raided its offices in Mumbai, the financial capital, and Gurugram near New Delhi. During the search, they seized documents, emails, and electronic devices. Subsequently, top executives were interrogated.
Remote Radio Head
The dispute centers on Samsung's imports of Remote Radio Head, a key component in 4G telecom networks. From 2018 to 2021, the company imported USD 784 million worth of these units from Korea and Vietnam without paying duties, arguing they were exempt. However, customs authorities determined the component attracted tariffs of 10-20 percent and accused Samsung of knowingly submitting false documentation.
According to the report, Samsung pushed India's tax authority to drop the scrutiny, saying the component did not attract tariffs and officials had known its classification practice for years. But customs authorities disagreed.
The component fitted on telecoms towers transmits signals and is subject to a tariff, the government said according to the report, though Samsung disagreed on how it functions.
Samsung's Defense
Samsung vehemently defended its classification, backing its case with four expert opinions, saying the component did not perform the functions of a transceiver and could be imported without any duty, the report quoted the tax order.
Government's Counterclaims
As counter evidence, tax officials cited 2020 letters from Samsung to the Indian government describing the component as a transceiver, which the government said is "a device which transmits" signals.
Samsung "was very much aware about the right classification of the impugned goods," the tax commissioner added, according to the report.
Samsung has been reportedly directed to pay Rs 44.6 billion (USD 520 million) in taxes and penalties, while seven senior executives, including its India network division vice president and CFO, face additional fines totalling USD 81 million.
Samsung Violated Indian Laws
Samsung "violated" Indian laws and "knowingly and intentionally presented false documents before the customs authority for clearance", Sonal Bajaj, a commissioner of customs, said in the order, as per the report.
Investigators found 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," Bajaj reportedly added.
"The issue involves the interpretation of classification of goods by customs," Samsung said in a statement, adding that it complied with Indian laws. "We are assessing legal options to ensure our rights are fully protected," the report added.
