The Bombay High Court has expressed “prime facie” dissatisfaction with Skoda Auto Volkswagen India’s arguments against a USD 1.4 billion notice from the Customs Department. The company is challenging a September 2024 show-cause notice issued by the Customs Department, which claims that Skoda Auto Volkswagen India allegedly provided misleading information by misclassifying its import of Audi, Skoda, and Volkswagen cars as “individual parts” instead of “Completely Knocked Down” (CKD) units, thereby paying significantly lower customs duties.
The Customs Department asserts that the company should have declared its imports as CKD units, which attract a customs duty of around 35%, instead of declaring them as separate components and paying only around 15% duty. The High Court has questioned the company’s argument, saying that if almost all the parts are imported as individual components and then assembled in India, it should be classified as a CKD unit.
The HC bench has also stated that the 2011 notification specifying that there should not be a method to circumvent the notification, and if all importers do the same thing, the notification will be just a paper. The company, however, claims that the demand of over Rs 12,000 crore customs duty is “exorbitant”, “arbitrary”, and “illegal”, and that it has followed the correct classification and paid tax accordingly. The company’s lawyer, Arvind Datar, argued that a notification was issued in 2011 imposing 35% tax on CKD models, and the company had classified itself as importing individual parts, paying tax accordingly. The HC has not yet decided whether to entertain Skoda Auto Volkswagen India’s plea, expressing “prime facie” dissatisfaction with the company’s arguments.