Samsung India executives seek to quash $81 million penalty over tax evasion
NEW DELHI :Seven Samsung India executives have asked a court to revoke penalties of $81 million included in New Delhi's $601-million tax demand from the company for allegedly misclassifying some imports, arguing "no grave offence" had been committed, according to legal papers and a source.
The Indian tax authority in January found Samsung and its executives evaded tariffs by misclassifying imports of key mobile tower equipment from 2018 to 2021. Samsung has separately challenged the order before a tax appeals tribunal, where it has defended its declarations and denied any wrongdoing.
While Samsung's India unit faced a $520 million demand, employees were asked to pay penalties totaling $81 million for "knowingly and intentionally" playing a role in the misclassification of imports.
In a High Court filing in Mumbai which was not made public but was seen by Reuters, Samsung India logistics executive Ravi Chadha said the authorities issued the penalty within two to three days of receiving hundreds of pages of detailed responses from the company and its executives in January, and the process was "rushed".
"This timeframe is utterly insufficient to conduct the requisite in-depth study," read the filing by Chadha, who faces a fine of 950 million rupees ($11.1 million).
"The present case is limited to the interpretation of tariff entries, no grave offence has been committed."
Samsung India and Chadha did not respond to Reuters queries. India's tax authority did not respond immediately to requests for comment.
Online court records show the six other executives including the network division's vice president, Sung Beam Hong, a general manager for finance, Sheetal Jain, and Samsung's general manager for indirect taxes, Nikhil Aggarwal, have also challenged the tax authority's order.
The lawyer for all seven executives, Sriram Sridharan of Indian law firm Lakshmikumaran & Sridharan, did not immediately respond to a request for comment. The law firm also represents Samsung in the tax appeals tribunal challenge.
Their pleas and grounds for revoking the penalty are identical to Chadha's, said a source with direct knowledge of the ongoing lawsuits.
In his court filing, Chadha argued that the "egregiously exorbitant" penalty is impossible for any salaried employee to bear, and it would take him more than 100 years to settle the amount given his earnings.
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Putien's founder Fong Chi Chung on his humble beginnings, giving back and the value of an egg
Off the coast of Putian city in China's Fujian province, we bobbed along on a boat together with Putien's founder Fong Chi Chung. We'd just admired the thriving yellow croaker fish and oyster farms from which the Putien restaurants in Singapore and all around Asia get their fresh produce, as part of a tour that Mr Fong was giving of his hometown. The restaurants, numbering more than 100, may be named after the Chinese city, but awareness of Putian as a place or destination is low. It is not on the usual tourist maps and few people have an understanding of what it is like. Although Mr Fong lives in Singapore and is a naturalised citizen, he sources produce from Putian for his restaurant chain. Known to everyone – workers and reporters alike – as 'Uncle Fong', the 57-year-old also leads the occasional private tour for people of Hinghwa descent, or to show the media what the area has to offer. At one point, he gestured to the wild, hilly islands surrounding our boat. 'What do you see?', he asked. The answer came: 'Nothing.' 'Right, even the hills are bare. There are no trees. Nothing grows. In the past, the people who lived here were so desperate, that there wasn't even tree bark to eat when they had no food. They would jump on the first ship that came along and say, 'We don't care where you're going. Just get us out of here'.' One wonders how many natives of this part of Fujian ended up settling in Singapore in this way, as Mr Fong himself did in 2000 when he first moved here to set up an electronics factory with his wife and two sons at the age of 32. He would go on to become a citizen in 2008. The story of how he decided to open the first Putien eatery that same year in a coffee shop on Kitchener Road because he missed the Hinghwa cuisine of his hometown is well known, as is Putien's rise to fame with a Michelin star in 2016 and the expansion to 100 outlets across Asia. Yet, no matter how successful they are, Putian natives remain a sentimental lot, Mr Fong said. Pointing to the shore opposite, dotted with handsome buildings, he added: 'Putian people who went overseas and did well for themselves came back to build homes here, because they remained very attached to the land. They said, 'I still want to come back'.' That same night, we were invited to dinner at Mr Fong's own home, where he spends a few months a year. He built the house in 2015, in the village of his birth. Designed with elements of traditional Chinese architecture such as a central courtyard, a grand hall and a landscaped garden, the property also has quarters for helpers, as well as a massive peacock aviary in the shape of a gilded birdcage. Fun fact: The peacocks were a gift, so he built them the aviary at a cost of 80,000 yuan (S$14,260). There were also cat towers and dog kennels. He had at least five or six rescued animals, either pedigrees given up by previous owners or strays that, 'thanks to fate', found their way to his home. In his front driveway, under a massive celebratory tent, there were at least 20 tables, a stage for song-and-dance performances and live calligraphy demonstrations by his artist friends. There were rows of live cooking stations featuring the best of Putian's gastronomical delights and all manner of libations, from Chinese yellow wine to not-for-sale vintages from billionaire Jack Ma's winery in Bordeaux, France. Even the mayor of Putian was in attendance. It couldn't have been more different from his childhood home. Mr Fong, the youngest of four children, said to me as we chatted in his garden: 'I was born in this very village. 'We were very, very poor. I shared a room with my grandmother, so I was very close to her. "At home, the best food we had was eggs from our chickens. The value of each egg was about 12 cents. They were so precious that we never ate them. Even as her grandson, I was never allowed any. But, when we had guests, she never hesitated to cook them eggs in sugar syrup.' One day, he recalled, a guest from abroad came to visit. His grandmother cooked four eggs for the guest. 'I said, 'Grandma, please cook just one more for me'. She said, 'You can have the leftovers'. "Usually, guests ate one or two eggs, said they were full and left the rest for the children. But, this guest, being from overseas, didn't know this. When the guest ate the fourth egg, I started bawling.' As a restaurateur today, his grandmother's way of hospitality stays with him. 'That principle influenced me deeply. Give the best to the guests,' he said. 'I always tell my workers very simply, 'Be nicer to the guests'. Then, you don't need standard operating procedures. Everyone should just be nice in their own way.' THE YEARS HAVE PASSED "VERY QUICKLY" This year, in October, Putien will celebrate its 25th anniversary. A quarter of a century in Singapore's tough dining scene surely means the business must be doing something right. However, Mr Fong looked blank when, back in Singapore, over the course of tea at his black-and-white bungalow, I asked if he was planning to celebrate this milestone. 'Is it our 25th anniversary?', he wondered. He hadn't realised it. 'Every day is full, so, I don't think much about it,' he said with a chuckle as he brewed some tieguanyin tea leaves at the table. 'But speaking of how our first day of business really was 25 years ago – recently, I was going through some old photos and thought, 'Wow, I was so young!' "It has been good. I pour myself into it and I love it. So, these 25 years have passed very quickly and happily.' When Putien first started operating in a coffee shop, there were about 30 dishes listed on an A3-sized piece of paper, Mr Fong recalled. Many of the dishes including the restaurant's famous lor mee, bee hoon and seafood dishes have remained unchanged since then. Mr Fong was never a chef himself, but he had exacting standards when it came to food. 'The chefs thought I was very difficult, but I had the name of Putian to uphold.' If you are wondering why the restaurant's name is spelt Putien with an "e" instead of Putian after the city, it was due to a fortuitous administrative error. 'Back then, it was a relative of mine in Singapore who went to register the business. The name is in the Fujian language, so he wasn't sure how it was spelled in English,' Mr Fong said with a laugh. 'Imagine if he had spelled it 'Putian'. It would have been a big problem. We wouldn't even have been able to register our business, 'Putian' would never have been approved. The heavens were on my side.' As for the business growing to the behemoth that it is today, he said: 'How could I ever have imagined that?' A FUNNY STORY FROM A TRIP TO THE SINGAPORE ZOO On why he is known by the intimate name of "Uncle Fong", there is a funny story behind this. At the start, he trained Singapore cooks to replicate the flavours of his home. Later on, he hired cooks from China who moved to Singapore with their families. While the cooks were busy at the restaurant one day, Mr Fong decided that he would take their young children on an excursion to the Singapore Zoo. 'We entered the zoo and the first thing we saw was a giraffe,' he recalled. 'All the children immediately cried, 'Boss, there's a giraffe'. And then, it was, 'Boss, there's a monkey'. "I was so embarrassed. Their parents called me 'boss' in Mandarin, so they thought that was my name.' Lest the other zoo visitors thought he was leading a syndicate exploiting children, he hastily instructed them to address him as 'Uncle Fong' instead. I had been in Putian, also known historically as Hinghwa or Xinhua, for just three days. During that time, I learned that the city is famous for being the birthplace of a sea goddess named Mazu, who has been worshipped for a thousand years. The city is also for its private hospital industry and for being the fake-sneaker capital of the world. I continued to learn even more through Mr Fong. The people of Putian are known for being hardworking due to the land's meagre resources. 'We have nothing special compared to neighbouring Fuzhou and Quanzhou. Land is scarce. So, out of necessity, people have to focus on survival,' he said. "To be honest, 'Putian's reputation in China is not very good. Online commentators write, 'You mean such a good brand can come out of Putian?' What they are saying is, Putian people only care about making money." In Mr Fong's mind, there's no doubt that while his restaurant chain has built its name on specialising in the food of Putian, Putien is a Singapore brand. FROM PUTIAN TO THE WORLD, VIA SINGAPORE In 2007, officials from trade agency Enterprise Singapore, then known as Spring Singapore, approached him after a meal at the original Putien eatery. 'I said, 'Huh? The Singapore government is looking for me?'" What the government agency wanted was to present an offer to help the business expand, by linking it up with brand and management consulting services. 'The consultants said, 'We'll help you build your brand like MacDonald's and KFC'. "I started imagining Putien staff members in uniforms like MacDonald's employees.' With a few hundred thousand dollars in grants, Putien opened two more outlets the following year. 'So, is it a Singapore brand? Of course, it is. We started in this market and we had the help of the Singapore government. That gave us the opportunities. If not, we'd have one restaurant and it might have done good business, but it might also have closed down when I got old,' he said. There is, however, no Putien restaurant in Putian, even though the city's government had asked him to open one there. Elsewhere in Chinese cities such as Shanghai, Beijing and Guangzhou, his restaurants are located in "the best shopping centres'. 'Lor mee and bee hoon are everywhere in Putian. There's no point in opening there,' Mr Fong said. Putien has built its success on the home-style food of the Putian people, but until just recently, 'Putian people would never serve Putian food at feasts", he added. "They would serve Cantonese food instead, because Putian food is peasant food.' His view is that if you don't know the food of your own people well, "you are letting subsequent generations down". He mused: 'I was also thinking, as a person, if I'm able to do one thing that's meaningful in my life, I'd be happy. How do you define meaning? It's not about doing business and making money ... in my mind, I wanted to bring Putian to the world." Sourcing produce from Putian such as traditionally harvested sea salt, Nanri abalone, bamboo shoots, loquats from the town of Shufeng and razor clams from the village of Duotou is another way in which Mr Fong builds links to his hometown. For the last two years now, Putien has organised the 'Duotou Clam Festival' in spring, during which journalists from across Asia are invited to take part in harvesting the razor clams from nutrient-dense black mud. 'Helping the farmers and promoting their produce is meaningful to me,' Mr Fong said. 'I don't invest money in the farms. I just feel it's my responsibility to help them earn more ... If I help them with publicity and they earn more money, they will work even harder, they will breed better varieties and they will take better care of the clams. Isn't that good? "We do our thing, which is opening and running restaurants. They do their thing.' LIMBS, HEAD AND HEART Of course, through 25 years, Putien has had its ups and downs, Mr Fong said. The COVID-19 pandemic, for instance, was "a period of daily nightmares". He was thinking if the whole company might collapse in three months. After the pandemic now, it hasn't been good either because there is so much competition. "Recently, my hair has been going white,' he exclaimed. Eating into the "China food" pie are Xiang Xiang Hunan Cuisine and Yun Nans, for example, not to mention the popular brand Haidilao, as well as the numerous eateries specialising in hotpot and mala meals. Mr Fong is not just head of Putien, he also oversees two Uncle Fong Hotpot restaurants and Sam Leong Street Chicken Rice. The key is to keep challenging oneself to evolve, he said. 'In business, you should never say, 'I'm doing well. I'm making money. I've opened so many outlets. This business will be mine for generations'. "I think that's an immature way of thinking. When time leaves you behind, it won't even stop to say goodbye.' How many people remember the Four Heavenly Kings of Singapore restaurants, he asked. 'When I first arrived in Singapore 25 years ago, they were the four famous chefs at four big restaurants. Why aren't they around today? "Hong Kong used to have massive, grand restaurants where everyone would go for breakfast and eat dim sum and drink tea with their morning newspapers. They flourished so much that it became a way of life for Hong Kong residents. Now, not even one is left. 'The worst thing for a restaurant is to be eliminated by natural selection. If you don't evolve with the times, you get left behind." He added: "Who knows, in two decades, people won't be dining like they do now and they won't go to our restaurants any more. The model has to change. Put yourself in danger. Challenge yourself.' In August last year, for example, Putien did just that by famously rolling out its 'no GST and no service charge' policy, such that it did not raise menu prices. 'In one month, we took in S$1 million less,' he said, likening the move to 'chopping off my own limbs". The left arm was the Goods and Services Tax (GST) and the right arm was the service charge. However, he also thought that if he did not do that, another brand might rise and go for his neck, he added. "I'd better cut off my own arms first.' His strategy worked and patrons were elated. Many old customers returned to support the restaurant chain. "If we don't have a good relationship with customers, they will go elsewhere. We keep thinking about how we can cultivate a warm relationship with our customers,' he said. The business lost money for nearly five months and in the end, the solution was to raise productivity. 'Could we put more effort into choosing products? Could we be less wasteful in the kitchen? At times, the workers outnumbered the customers in the restaurant, which was wasteful. "In business, they say, you really have to wring the towel dry.' With the adjustments, from the start of this year, the business has been "making money and more than before", he added. His point was that by improving team productivity, each outlet made more money and each employee got more money. To be a successful and happy restaurateur, you cannot look at it as just a business, Mr Fong said, adding that if he did, it would be easy to close shop and "not work so hard" once the business stopped being profitable and the market was not good. 'I see it as a responsibility. If you close down, so many people will have to look for new jobs. And guests who love the food will be very sad.' He also cannot bear the thought of long-time regular customers saying that Putien is getting more expensive. "They should feel that Putien is still the same Putien they knew 20 years ago.' Mr Fong's two sons, aged 31 and 33, are both involved in running Putien. "Sometimes, I think, 'Why are my two sons so stupid?' They've joined me in this business. It's so difficult. Why don't they do something else? "But they are like me. They enjoy it. They have had an emotional connection to the restaurant since they were young.' As to whether he has thought about retiring and letting his sons take over, Mr Fong said it is not something he "dares to do" now given the market conditions. It would be an "irresponsible" move. There is also the sense that it can be a frightening prospect. "What's there to do after retirement? You can't drink all day. Your body won't be able to take it.' He might, when the day comes, take up painting again. He studied art before graduation and although the walls of his home are adorned with art pieces, none of the paintings are his. In case you are wondering, he does eat frequently at his own restaurants and also at high-end restaurants, but during his time off, his first choice is to tuck into hawker food. 'Every food court has good food,' he said, listing bak kut teh (pork bone soup), Hainanese chicken rice and laksa (noodles in spiced coconut milk broth) as his top three favourite dishes. 'A good friend took me to Katong to try a laksa he liked, but I prefer the one at Jalan Besar.' In his free time, he'll also play with his pet cats and dogs, and he has several in Singapore. Most were given up by other pet owners and taken in by him. 'When I'm away from Singapore, I insist the people at home send me pictures of my pets every day. Cats are more complex creatures. Dogs are just focused on their owners. I don't particularly train them. Just be kind to them and it's enough. "Just by looking into my eyes, they can tell what I want with more accuracy than people.' For now, though, an idyllic life isn't on the cards. Instead, he's turning his focus towards bringing established food-and-beverage brands from China into Singapore, including 'China's best dumplings, China's best fast food and China's best dim sum'. 'In China, everyone knows that if you go to Singapore, you have to look for Uncle Fong. I used to just focus on Putien but now, I think I can do this," he said. 'I think I've done enough in 25 years. I've done something meaningful. I've raised the profile of my hometown. I've helped many farmers. I've helped people learn to run restaurants. And I've brought Putian to prominence.'
