Offices of South Korean giant Samsung Electronics were searched by officials of the Directorate of Revenue Intelligence (DRI) over suspected evasion of duty on import of network equipment, according to a report in the Economic Times (ET). “The searches began in the Delhi and Mumbai offices of Samsung on Wednesday. We have yet to hear anything about the DRI’s findings,” a source told ET. 

Sources told ET that as the company’s networking operations are mainly in Mumbai, DRI officials visited the Mumbai office first before visiting its regional headquarters in Gurugram also with queries. Officials reportedly examined documents related to imports furnished by Samsung. A source added that requisite steps will be taken to determine if the company evaded customs duty and if so, whether it’s mala fide. Samsung Electronics declined to comment on the development.

Samsung Electronics is the biggest 4G vendor in the country in terms of volume and is an exclusive 4G equipment provider to Reliance Jio Infocomm. As per the ET report, Samsung has to pay zero duty on import of telecom products from its manufacturing base in South Korea and Vietnam via the free trade agreement (FTA) route. This is in contrast to the likes of Europe’s Nokia and Ericsson and China’s ZTE and Huawei, which pay 20% duty.

An industry insider told ET that the government might have received intelligence about the equipment being made in a non-FTA country and routed through South Korea or Vietnam with low value addition in those geographies.

The government in October 2018 had doubled the import duty to 20% on different types of network equipment including IP radios, base stations, ethernet switches, optical transport equipment, VoIP phones, among others, besides levying a 10% customs duty on products like printed circuit boards.

Most imports of network equipment from South Korean suppliers have a duty-free status under the present trade pact between India and South Korea, called the Comprehensive Economic Partnership Agreement (CEPA).