The Bombay High Court is currently hearing a case between the Customs Department and Skoda Auto Volkswagen, a German automaker, over a $1.4 billion tax demand notice issued by the Customs Department in September 2024. The notice alleged that the company imported car parts as individual units rather than as “completely knocked down” (CKD) kits, which attract higher import duties. Skoda Auto Volkswagen claims that this is a tax evasion scheme, while the company argues that it has been importing individual car parts for over 20 years and has always paid duties as per the individual parts classification.
The Court has heard the case extensively and questioned the company’s method of importing car parts, suggesting that it may be a way to circumvent tax laws. The Customs Department, however, has assured the court that it has not and will not block any of Skoda Auto Volkswagen’s consignments. The case is scheduled for further proceedings on February 20.
Skoda Auto Volkswagen’s counsel, Arvind Datar, has argued that the company’s method of importing individual car parts is not a new practice, and the authorities had consistently cleared its imports from 2011 to 2024, with duties paid as per the individual parts classification. He also pointed out that the Customs Department had not raised any issues with the company’s imports until a customs officer at Mumbai’s Nhava Sheva port unilaterally decided in 2024 that the company’s imports should be classified as CKD.
The Customs Department, on the other hand, claims that Skoda Auto Volkswagen misclassified its imports of Audi, Skoda, and Volkswagen vehicles, declaring them as separate components instead of CKD units, which attract a 30-35% import duty. The company allegedly paid only 5-15% duty, significantly reducing its tax liability. The case highlights the complex and sometimes contentious relationship between tax authorities and multinational corporations, with the High Court seeking to clarify the facts and determine the validity of the tax demand.