No halt on Skoda Volkswagen shipment over $1.4 billion tax demand: Customs to Bombay High Court
The Bombay High Court heard a petition from Skoda Volkswagen India on Monday, challenging a USD 1.4 billion tax demand issued by Indian customs authorities. The case revolves around a dispute regarding the classification of imported vehicle parts, with the company arguing that it has been unfairly charged higher taxes over the past 12 years.
During the proceedings, the customs department assured the court that no consignments from Skoda Volkswagen had been stopped, nor would they be halted in the future. Additional Solicitor General (ASG) N. Venkataraman, representing the tax authorities, emphasised that the company’s imports had not been impeded, responding to the company’s concerns about the customs blocking their shipments.
The issue centres on the classification of car parts imported by Skoda Volkswagen, which the tax authorities have categorised as “completely knocked down” (CKD) units, subject to a higher duty rate of 30 per cent. CKD refers to vehicle parts imported in unassembled form, which are then put together at local facilities. The company has contested this classification, arguing that its imports were misdeclared as individual components, paying only a 10 per cent duty.
Skoda Volkswagen’s legal team argued that the concept of CKD parts was introduced only in 2002 and lacked clarity until 2011, when the company received a favourable clarification from tax authorities regarding the classification of these parts. The company claims that the authorities have now changed their interpretation, leading to the massive tax demand.
After an extensive hearing, a bench led by Justices BP Colabawalla and Firdosh Pooniwalla decided to adjourn the case until February 20, 2025. The court has scheduled the next session for ASG Venkataraman to present further arguments, while Skoda Volkswagen’s lawyers will have the opportunity to submit a rejoinder by February 24.
