Volkswagen Consignments Unaffected By Tax Notice, Customs Tells Bombay High Court
The Bombay High Court on Monday was informed by the Customs Department that no consignment from Skoda Auto Volkswagen India has been or will be halted despite the company receiving a tax demand notice of $1.4 billion. The notice was issued over allegations that the company provided misleading information regarding its imports.
A division bench comprising Justices B.P. Colabawalla and Firdosh Pooniwalla was hearing a petition filed by the German automaker last month, challenging the notice as “arbitrary and illegal.” The court heard arguments at length and scheduled the next hearing for February 20.
The tax demand, exceeding ₹12,000 crore, was described by the company as “exorbitant.” The Customs Department has alleged that Skoda Auto Volkswagen India misclassified its imports of Audi, Skoda, and Volkswagen vehicles by declaring them as “individual parts” rather than “Completely Knocked Down” (CKD) units. CKD units attract a customs duty of 30-35%, whereas the company paid only 5-15% in duties by importing components separately under different consignments.
During the hearing, the bench raised pointed questions about the company’s classification practices. Justice Colabawalla observed that under such an approach, the company could technically import all car components except a single part—such as the gearbox—while still claiming them as individual parts rather than a CKD unit.
“You bring in all the components except for one. Let’s say the gearbox. You would still fall under the parts component and submit import duty at a lower rate. That is just clever tax planning,” Justice Colabawalla remarked. He further added, “Even if you import all parts in one shipment except the gearbox and engine, your argument of individual parts would still stand, wouldn’t it? Still, you wouldn’t fall under the CKD unit category.”
The matter remains pending, with further hearings set to continue on February 20.