Mumbai: The Bombay High Court will hear on February 17 a plea by Škoda Volkswagen India challenging the $1.4 billion tax demand by Indian customs authorities.
A bench of Justices B.P. Colabawalla and Firdosh Pooniwalla said they would hear the matter on February 17 after the plea was mentioned by Škoda Volkswagen’s counsels, Naresh Thacker and Gopal Mundhra.
About The Case
The automobile major has challenged the show cause notice issued by the customs authorities in September 2024 under the Customs Act, alleging that Škoda Auto Volkswagen India misclassified its imports of Audi, Škoda, and Volkswagen cars as “individual parts” instead of “completely knocked down” (CKD) units, thereby paying significantly lower customs duties.
The customs authorities claimed that while CKD units attract a 30-35% duty, Volkswagen declared its imports as separate components in different shipments, thereby paying only 5-15% in duties.
Even the Directorate of Revenue Intelligence (DRI) has contended that Volkswagen has been importing nearly complete cars in this manner for over a decade and should have paid the higher rate applicable to CKD units.
The customs department, represented by Additional Solicitor General (ASG) N. Venkataraman, told the bench that authorities have “incriminating private records” to support their claim.
The company countered this, stating that the concept of CKD parts was introduced only in 2022 and that there was no clear definition until 2011. It contended that the company had sought and received clarification from the tax authorities in 2011, which was in its favor. The company alleged that the DRI has now changed its interpretation of the rules, leading to the massive tax demand.
Volkswagen operates two manufacturing facilities in India — one at Chakan in Pune and another at Shendra in Chhatrapati Sambhajinagar.
