Samsung Battles $520 Million Tax Shocker, Drags Reliance Into The Fray: Report

Samsung reportedly highlighted that the classification method it used had never been flagged by customs officials, even though it was openly in use by Reliance prior to 2017.

Samsung further noted that Reliance had received a warning from tax authorities back in 2017, but did not relay this to Samsung.

Source : Samsung

Samsung has launched a legal challenge against a hefty $520 million tax demand by Indian authorities, reported Reuters, claiming that the government was already aware of the import classification practice in question, one previously followed by none other than Reliance Jio.

The South Korean electronics major filed a 281-page appeal with the Customs Excise and Service Tax Appellate Tribunal in Mumbai, seeking to overturn the allegation that it misclassified telecom equipment imports to evade 10-20% tariffs. The case centres around the import of a device known as the Remote Radio Head, a key component in 4G mobile infrastructure, between 2018 and 2021.

Samsung's Indian unit argues it was simply following an industry practice that officials had accepted earlier. According to its filing, Reliance Jio had a “long-established practice” of importing the same equipment without incurring customs duty until 2017 — a fact the government was “fully aware” of.

'Authorities Were Aware, But Never Questioned Us'

In its submission, Samsung reportedly highlighted that the classification method it used had never been flagged by customs officials, even though it was openly in use by Reliance prior to 2017.

“The classification adopted by the appellant (Samsung) was known to the authorities, however, the same was never questioned ... Department was fully aware,” the company reportedly stated in its April 17 filing.

Samsung further noted that Reliance had received a warning from tax authorities back in 2017, but did not relay this to Samsung.

“Reliance Jio officials did not inform” Samsung about the tax warning of 2017, the company reportedly said.

Tax Blow Could Dent Samsung India's Bottom Line

The financial implications are significant. The $520 million demand alone amounts to over half of Samsung India's net profit of $955 million from last year. In addition to the main demand, Indian tax authorities have also levied an $81 million fine on seven Samsung employees, raising the total to $601 million. It remains unclear whether the individuals involved will contest the penalties separately.

This dispute makes Samsung the second global player in recent months to contest a major tax order in India, following Volkswagen’s legal battle over a record $1.4 billion claim.

'Hurried' Order, Unfair Hearing: Samsung

Samsung also raised concerns about procedural fairness. The company claims that the January tax order was rushed and issued without giving it an adequate opportunity to defend its position.

According to Samsung’s filing, the order was passed “in a hurry” despite the “huge stakes” involved and without allowing “a fair opportunity” for the company to make its case.

The government, for its part, contends that Samsung deliberately misclassified $784 million worth of imports from South Korea and Vietnam to maximise profits. The January order accused the firm of crossing ethical lines.

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 order stated.

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