Bharti Airtel will be approaching the Supreme Court to challenge the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) order alleging customs duty evasion. The telecom operator has been asked to pay about Rs 800 crore in an order passed by the tribunal on June 7.

Industry issue

“This is an industry issue regarding exemption from customs duty on the software imported by telecom operators for equipment. The Supreme Court is already seized of the issue in a similar matter involving another operator. We intend to file an appeal in the Supreme Court,” a Bharti spokesperson said.

A top Customs Department official told Business Line that a ‘showcase notice’ will also be issued to the telecom major within this month asking for payment of the entire amount. However, according to the Customs Act, Airtel has about three months to appeal at the Supreme Court.

“This is the second stage of appeal, so we’ve waited enough since the duty order was confirmed. We will not wait anymore, unless they (Bharti) get a stay order from the Supreme Court. There are processes of recovery,” the official said.

The first stage of appeal refers to the original adjudicating order passed by the Commissioner of Customs, Bangalore in April, 2008.

Though Bharti challenged this order, it was upheld by the CESTAT this month. However, the tribunal did not charge co-apellant, Ericsson.

The total amount of Rs 800 crore includes duty liability of Rs 251 crore, an equal penalty, redemption fine for confiscated goods, apart from interest due on the duty liability.

The case had alleged “undervaluation of the imported goods and non-inclusion of the value of software in the imported goods”.

It added that Bharti Airtel “were importing mobile telecom equipment by splitting the value of the equipment into hardware and software components; the hardware was imported first and undervalued to the extent of value of software; that the software imported was dummy and was stored in the warehouse; that hardware comes with the embedded software and is ready to use”.

Two orders

A few months ago, the Commissioner of Customs, Bangalore had also issued two orders alleging undervaluation of goods imported from related companies based out of Singapore. These can be appealed at the CESTAT. While Hewlett-Packard’s India sales unit had been asked to pay over Rs 2,000 crore, another US-based firm Sun Microsystems is liable to pay about Rs 330 crore.