Bharti Airtel has been asked to pay over Rs 700 crore for customs duty evasion under a Customs, Excise and Service Tax Appellate Tribunal (CESTAT) order issued last week by its Bangalore bench.

The total amount due includes differential duty liability of Rs 215.51 crore, apart from a similar amount of penalty and a redemption fine of Rs 189 crore for confiscated goods. Additionally, an interest on the duty liability has also been charged on a per year basis.

According to documents seen by Business Line , the case alleges “undervaluation of the imported goods and non-inclusion of the value of software in the imported goods.”

The document states 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.”

Based on that intelligence, searches were conducted at Bharti Airtel's Bangalore office in 2004.

“Bangalore customs had booked the case and last week the order came in its favour. If Airtel wants to appeal, it will have to go to the Supreme Court as with all cases relating to classification and valuation issues,” a Government official said.

Asked about the developments over e-mailed queries, a company spokesperson said, “Bharti Airtel is yet to receive a copy of the order.”

The CESTAT order follows an April 2008 adjudicating order by the Commissioner of Customs, Bangalore. The 2008 order had also penalised Ericsson India by Rs 10 crore for its involvement. Bharti Airtel had appealed that order at the CESTAT, which began its proceedings in April this year and after hearing both parties, announced the decision in June.

According to sources, Mr P.R.V. Ramanan, former member, CBEC and ex-Chief Commissioner of Customs, Bangalore, was the counsel on behalf of the Directorate of Revenue Intelligence. Bharti Airtel was reportedly represented by law firm, Lakshmikumaran & Sridharan.

A few months back, 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 computer giant 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.