The ongoing legal battle between Skoda Auto Volkswagen India and the Indian customs department took a significant turn on Monday as the customs authorities assured the Bombay High Court that they have not, and will not, halt any shipments related to the automaker. This assurance comes amid a heated dispute over a massive $1.4 billion tax demand.
Customs Department Clarifies Position Amid Tax Dispute
The customs department, represented by Additional Solicitor General N Venkatraman, confirmed to the court that no consignment of Skoda Auto Volkswagen India has been stopped since the issuance of the contentious show cause notice in September 2024. “We have not interrupted any imports and assure the court that we will not do so moving forward,” Venkatraman stated. The court accepted this assurance while scheduling the next hearing for February 20.
What Sparked the $1.4 Billion Tax Dispute?
The dispute stems from allegations that Skoda Auto Volkswagen India misclassified imported car parts as individual units instead of “completely knocked down” (CKD) units — a category that attracts higher customs duties. The tax notice argues that the company underreported its import duties by categorizing components of Audi, Skoda, and Volkswagen vehicles incorrectly.
Senior counsel Arvind Datar, representing the German automaker, contested the notice, calling it “arbitrary and illegal.” According to Datar, the company has consistently adhered to customs regulations since 2001 and paid duties as per the prevailing classification norms. “From 2011 to 2024, the authorities accepted our filings without objection. The sudden issuance of this notice in 2024 defies logic,” he asserted.
Timeline of the Controversy
Skoda Auto Volkswagen India began importing car components in 2001. In 2011, customs regulations were revised, leading to increased duties on completely knocked-down (CKD) units. Despite the changes, the company continued to pay duties based on the classification of parts without facing any objections from authorities between 2011 and 2024. However, in September 2024, customs officials issued a $1.4 billion tax demand, alleging the misclassification of these imports. By February 2025, the case had escalated to the Bombay High Court for further legal proceedings.
Industry Impact and Future Implications
The auto industry is closely watching the case, as its outcome could set a precedent for other automakers importing components into India. “This case highlights the importance of clarity in customs classifications,” said an industry expert who requested anonymity.
The next hearing, scheduled for February 20, 2025, is expected to delve deeper into the technical aspects of import classifications and the validity of the customs department’s claims.
Case Details
Case Title: Skoda Auto Volkswagen India Versus Union Of India
Case No.: WP/2051/2025
Read More: CBIC Notifies Automation Of Refund Application And Processing In Customs
