The customs department informed the Bombay High Court today that it has not stopped and will not stop any import consignment of Škoda Auto Volkswagen India, while hearing the matter pertaining to a $1.4 billion tax demand made by the Indian authorities on the German automaker.
Volkswagen has sued Indian authorities to quash a tax demand made last year by Indian authorities who had alleged that it had bypassed regulations to pay a lower duty by using a strategy to break down imports of some of its cars into many individual parts.
A division bench of Justices BP Colabawalla and Firdosh Pooniwalla heard the matter on Monday and is expected to continue on February 20.
“You (petitioner) bring in all the components except for one – let’s say the gear box. You would still fall under the parts component and submit import duty at a lower rate. That is just clever tax planning,” Justice Colabawalla said according to a PTI report.
Additional Solicitor General N Venkatraman appearing for the customs department stated it has not stopped any consignment of the automaker and would not do so going forward.
“The whole controversy is about whether it is parts of completely knocked down units. The petitioner company has been importing parts since 2001. The authorities did not rake up the issue from 2011 to 2024. Why suddenly in 2024? Till 2023-2024, the company has been paying duty as charged for parts and not CKD. The show cause notice has to be quashed,” said Senior counsel Arvind Datar appearing for Skoda Auto Volkswagen according to a PTI report.
In its earlier filing at the High Court in Mumbai, the carmaker had stated that the “impossibly enormous” tax demand is contrary to India’s import taxation rules for car parts and puts at risk its investments of $1.5 billion in India while being detrimental to the foreign investment climate.