Samsung Challenges Govt's $520 Million Tax Demand, Says Reliance Followed The Same Classification Method

Samsung Electronics’ Indian unit is pushing back against a significant $520 million tax demand, contending that the government was already familiar with the classification method used for importing telecom components.

The dispute centers around imports of a device known as the Remote Radio Head, a critical part of 4G infrastructure, which Samsung supplied to Reliance Jio between 2018 and 2021.

According to a 281-page submission to the Customs Excise and Service Tax Appellate Tribunal (CESTAT) in Mumbai, Samsung claimed the classification method was long used by Reliance itself without objections from authorities, reported Reuters.

"The classification adopted by the appellant (Samsung) was known to the authorities, however the same was never questioned ... Department was fully aware," the South Korean company argues in its April 17 filing.

Samsung alleges that tax officials allowed this classification practice for years and had even warned Reliance back in 2017. However, the company says it remained unaware of the warning and was never alerted by either Reliance or the authorities. "Reliance Jio officials did not inform" Samsung about the tax warning of 2017, the filing stated.

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Broader Tax Scrutiny on Foreign Firms

This legal battle makes Samsung the second prominent international corporation to mount a legal defense against large Indian tax claims in recent months. Volkswagen previously initiated legal proceedings over a $1.4 billion tax claim tied to similar classification issues for imported auto parts.

In Samsung’s case, Indian tax authorities allege the firm deliberately misclassified imports valued at $784 million from Korea and Vietnam to sidestep 10–20 per cent tariffs.

The tax order, issued in January, accused the company of prioritizing profit over compliance, saying it “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.”

In addition to the $520 million customs demand, Indian officials have levied an $81 million penalty on seven Samsung employees, pushing the total amount in dispute to $601 million. It is unclear whether the employees intend to challenge the fines independently.

Samsung’s filing also raises concerns about the manner in which the tax order was issued, suggesting procedural lapses. The company claims the ruling was rushed and that it was denied adequate time to present its defense. “In a hurry,” the order was passed without providing "a fair opportunity" for representation, Samsung notes in the filing, arguing this was especially unjust considering the "huge stakes" involved.

Details surrounding the 2017 warning received by Reliance remain undisclosed in Samsung’s filing and are not publicly available.

Samsung, which earned $955 million in net profit in India last year, is a major player in the country’s electronics and smartphone sectors. The outcome of this case could have wider implications for how India handles tax classification disputes, particularly involving multinational corporations.

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