The agency in the notice also asked why a penalty should not be imposed against the senior management of the company. The DRI also issued a show cause notice to PricewaterhouseCoopers Pvt Ltd (PwC) and an associate director, who was questioned during the probe.
SIEL, PwC have 30 days to reply to notice
PwC was engaged by SIEL for classification of the network equipment, which is under scanner.
The issue pertains to alleged misdeclaration in importing remote radio head (RRH), a networking device, and its alleged misclassification by SIEL, in order to wrongly avail undue exemption of basic customs duty.
The notice asked why “the impugned goods, having total accessible value of Rs 6,72,821 crore, imported under the bills of entry should not be held liable for confiscation under the provisions of section 111 (m) of the Customs Act, 1962”, said a person, quoting the notice, on condition of anonymity. The agency further asked why the “differential duty (of) Rs 1,728.47 crore in respect of the bills of entry should not be demanded and recovered from them under the provisions of section 28 (4) of the Customs Act, along with interest at the applicable rate”.
The notice also asked why the department should not adjust Rs 300 crore deposited by SIEL towards payment of differential duty.Gurgaon-based SIEL, PwC and the individuals summoned have a 30-day period to reply to the adjudicating authority.
ET’s queries emailed to SIEL and PwC did not elicit any response till press time.
RRH is a radio-frequency circuitry enclosed in a small outdoor module and one of the most important subsystems of 4G LTE telecommunication system. While the DRI has argued that RRH is an independent equipment and hence not liable for exemption, the firm has argued otherwise.
According to the DRI, an analysis of the import data indicated that SIEL imported RRH in India since January 2018. It said that 219 bills of entry for import of the RRH were cleared by SIEL between January 2018 and July 2021, wherein the RRHs were self-assessed by the importer and cleared at nil rate of basic customs duty.
In 2012, SIEL got a contract from Reliance Jio for supplying 4G equipment. However, after the introduction of the goods and services tax (GST) regime in 2017, SIEL started to import the telecom equipment itself and sell it locally to Reliance Jio.
SIEL was importing RRHs of three different specifications so as to provide enhanced 4G coverage and to expand the cell size. The three RRHs have different spectrum characteristics. According to the DRI, RRHs were sold in units as these were finished products. There was no further manufacturing done by the company on the RRHs and these were directly sold to Reliance Jio after clearance. However, in the bills of entry under scrutiny, the quantity of RRHs was declared in kilograms, according to the agency.
Subsequently, in July 2021, the DRI conducted searches on premises linked to SIEL in Gurgaon and Mumbai. The case is being probed by the Mumbai unit of the DRI.
The probe concluded that SIEL had deliberately misclassified the RRH, according to the agency. “RRH was being classified by SIEL under ‘parts’ in CTI 85177090. Therefore, it appeared that SIEL had deliberately misclassified the RRH,” said the person, quoting the show cause notice. “It also appears that officials of the indirect tax team of SIEL were giving evasive replies or giving absurd answers during their statements. For example, Shri Nikhil Aggarwal, GM (indirect taxation) during his statement absurdly/mischievously described the terms ‘transmission’ and ‘reception’ i.e., transmitting/receiving signals through air only and not under wired communication. He had further stated that eNodeB consisted of DU, antenna and RRH and since DU could work independently it was being classified under CTI 85176290 whereas RRH was being classified as part of eNodeB as RRH could not function independently.”
Quoting the show cause notice, the person further said, “There appeared to be complete disarray at the top level of SIEL, so far (as) customs compliance was concerned. On being asked as to who was the final authority in customs related matters in SIEL, their officials were wary of owning up any responsibility, especially in matters relating to classification of the imported goods.” “Sources also said that the expatriate Korean who was handling these imports of RRH for Samsung India has been fired from the company for his lapses, thereby indicating that Samsung Korea had indirectly acknowledged the lapses on the part of the Indian subsidiary.
The show cause notice said that despite a dedicated indirect tax team, it appeared that the customs classification issue was handled by the logistics team. “Further, the issues regarding customs clearance were being handled by the sales team of Network Division in spite of the fact that the logistics team handles the customs clearance. The so-called different classification adopted by various countries was also discussed with regard to eligibility of FTA (free trade agreement) criteria,” said the person, citing the notice.