The Bombay High Court has scheduled February 17 as the hearing date for Skoda Volkswagen India’s legal challenge against a massive ₹11,700 crore ($1.4 billion) tax demand by Indian customs authorities. The dispute revolves around alleged misclassification of imported car parts, which authorities claim allowed the automaker to pay lower customs duties.
Case Background
A Division Bench comprising Justice BP Colabawalla and Justice Firdosh Pooniwalla agreed to expedite the hearing after Volkswagen’s legal team, led by advocates Naresh Thacker and Gopal Mundhra, urgently raised the matter in court. The crux of the dispute lies in whether Volkswagen improperly declared imports of Audi, Škoda, and Volkswagen car components as “individual parts” instead of “completely knocked down” (CKD) units between 2011 and 2024.
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The Directorate of Revenue Intelligence (DRI) alleges that Volkswagen imported nearly complete cars in separate shipments over a decade, classifying them as individual parts to pay only 5–15% duty. Authorities argue CKD units, which require minimal assembly, should attract 30–35% duty.
“Volkswagen has been importing cars in a manner that bypasses higher CKD rates. We have incriminating private records to support this claim,” stated Additional Solicitor General N Venkataraman, representing the customs department.
Volkswagen’s Defense:
The automaker contends that CKD rules lacked clarity until 2011. Its counsel argued that the company sought and received a favorable clarification from tax authorities in 2011, allowing it to classify imports as parts.
“The DRI is retroactively changing its interpretation of CKD rules. Our client followed existing guidelines and paid duties accordingly,” Volkswagen’s lawyers asserted.
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Financial Impact: A ₹11,700 crore penalty could severely affect Volkswagen’s operations in India, where it operates manufacturing plants in Chakan (Pune) and Shendra (Chhatrapati Sambhajinagar).
Legal Precedent: The outcome may influence how multinational companies classify imports, impacting tax liabilities across industries.
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Timeline Concerns: The DRI’s decade-long investigation and delayed penalty notice raise questions about retrospective tax demands.
The February 17 hearing will focus on whether the customs department’s claims hold legal merit
