The Mumbai customs department has approached the Supreme Court, challenging three Reliance group companies, Reliance Sibur Elastomers Pvt. Ltd, Reliance Corporate IT Park Ltd, and Reliance Digital Platform & Project Services Ltd, over the higher import duty levy on their Cisco UC/IP phone shipments.
The case came before a bench of Justices Manoj Mishra and Ujjal Bhuyan on Friday, who adjourned the hearing to next Friday (19 September).
Customs and Reliance are disputing how to classify the imported Cisco phones under India’s Customs Tariff Act, 1975.
Customs reclassified the VoIP desk phones as video conferencing equipment, which carries a higher duty. Reliance argued that the devices lacked cameras, did not support video calls, and deserved classification as ordinary push-button telephones.
Not adequate technical reasons
The customs department did not provide sufficient technical reasons to justify the penalty. Due to the lack of evidence and proper technical assessment, the tribunal ruled the penalty unjustified.
The issue dates back to three shipments made by Reliance on 17 October 2018, 25 November 2019, and 5 May 2020.
Customs disagreed with the classification, citing previous tribunal rulings suggesting that VoIP devices could be treated as video conferencing equipment. Following this, Mumbai’s Customs (Appeals) Commissioner upheld the higher duty classification for all three Reliance entities.
The tribunal overturned the penalty against Reliance, ruling that its basic VoIP phones, used only for voice calls and without video cameras, were wrongly classified under an earlier decision meant for video conferencing devices. The prior Ingram Micro case did not apply, and customs authorities had erred in extending its scope.
Reliance challenged these orders before the Customs, Excise and Service Tax Appellate Tribunal (Cestat). In its 7 April 2025 ruling, the tribunal sided with Reliance and cancelled the higher duty demands.
The tribunal noted that the Cisco UC/IP phones were ordinary push-button telephones without built-in cameras and could not be considered video conferencing equipment. It highlighted that Heading 8517 of the Customs Tariff Act clearly distinguishes “telephone sets” from other network machines, and extending the description to include simple VoIP phones was improper.
Classification disputes
Cestat also observed that Customs had failed to discharge its burden of proof in reclassifying the devices and had misapplied the previous rulings related to exemption eligibility, not the classification of VoIP phones.
Subsequently, all three Reliance appeals were allowed, and Cestat quashed the higher duty demands.
Heading 8517 of India’s Customs Tariff Act covers telecommunication and data transmission devices. It includes telephone sets (corded, cordless, cellular, and VoIP) and other apparatus for transmitting or receiving voice, images, or data, such as routers and video conferencing systems. Proper subheading classification under 8517 determines the applicable import duty rates.
This case highlights the recurring complexity of classification disputes in India’s tax regime.
Tax authorities have debated whether to tax parathas like rotis, classify coconut oil as edible or cosmetic, and apply differing GST rates to popcorn, paneer analogues, pizza bases, high-end monitors, fertilizers, and computer components. Such disputes often move through multiple levels, from the Authority for Advance Rulings (AAR) to tribunals, high courts, and sometimes the Supreme Court, straining India’s judicial system.
In July, tax authorities also challenged Reliance over charter flight services used by Reliance executives through its subsidiary, Reliance Commercial Dealers Ltd (RCDL). The tax department argued that RCDL was effectively renting aircraft to Reliance, which should attract higher taxes akin to equipment rentals. RCDL argued that it provided air transport services and deserved taxation at standard air service rates.
India’s recent GST reforms aim to reduce such conflicts. The GST Council has simplified the indirect tax structure, reducing rate slabs from four to two, 5% and 18%, with a 40% levy reserved for sin goods.
Under this framework, most phones, including VoIP and high-end devices, will now attract 18% GST, irrespective of their category, offering clarity and relief for industry and consumers.
