The Bombay High Court will hear on February 17 a petition filed by Škoda Volkswagen India challenging a $1.4 billion tax demand issued by Indian customs authorities.
A bench of Justices B.P. Colabawalla and Firdosh Pooniwalla said they would hear the matter on February 17 after the plea was mentioned by Škoda Volkswagen’s counsels, Naresh Thacker and Gopal Mundhra.
About The Case
The automobile major had challenged the show cause notice issued by the customs authorities in September 2024 under the Customs Act. The notice alleged that Škoda Auto Volkswagen India misclassified its imports of Audi, Škoda, and Volkswagen vehicles as “individual parts” rather than “completely knocked down” (CKD) units, resulting in significantly lower customs duties.
Customs authorities contend that CKD units attract a duty of 30-35%, whereas Volkswagen declared its imports as separate components in different shipments, paying only 5-15% in duties. The Directorate of Revenue Intelligence (DRI) has argued that Volkswagen has followed this method for over a decade, effectively circumventing the higher CKD duty.
Additional Solicitor General (ASG) N. Venkataraman, representing the customs department, informed the court that authorities have incriminating private records to support their claim.
Škoda Volkswagen India, however, maintains that the concept of CKD parts was formally introduced only in 2022 and lacked a clear definition before 2011. The company asserts that it sought and obtained clarification from tax authorities in 2011, which ruled in its favor. It has accused the DRI of altering its interpretation of the rules, leading to the massive tax demand.
The Volkswagen Group has long been assembling CKD units in India for its various brands, including Audi, Volkswagen, and Škoda. Popular models like the Octavia, Superb, Kodiaq, Passat, Jetta, and Tiguan have been imported as CKD units and assembled locally.
In 2019, Volkswagen Group India merged its three passenger car subsidiaries into a single entity—Škoda Auto Volkswagen India—to streamline operations and boost market share for Volkswagen and Škoda by 2025.
As part of its expansion in India, the Volkswagen Group announced investments of approximately 1 billion euros in July 2018 under its India 2.0 project. The company operates two manufacturing facilities—one in Chakan, Pune, and another in Shendra, Chhatrapati Sambhajinagar.
