The government on Thursday defended its record ₹11,000 crore customs duty demand against German automaker Volkswagen before the Bombay High Court, arguing that the company failed to share the required information on time. The company, however, said the demand was raised years after the alleged imports.
Customs vs Volkswagen dispute: All you need to know
The case against Volkswagen stems from the Centre’s allegation, made in 2024, that the German carmaker undervalued its imported vehicles in the country for years and paid lower-than-applicable tariffs, Reuters reported. The dispute has now become a flashpoint for Volkswagen as it holds talks with India’s JSW Group regarding the sale of a stake in its local operations.
Volkswagen, which holds a roughly two per cent market share in India, the world’s third-largest car market, has repeatedly denied the allegations. The company had previously said that the case was a matter of “life and death” for its business in the country, adding that it was “impossibly enormous”.
According to reports, the dispute involves Skoda Auto Volkswagen India Pvt Ltd (SAVWIPL) and customs authorities over the classification and taxation of vehicle parts imported for the company’s Aurangabad plant.
Authorities alleged that Volkswagen brought in vehicle parts as individual components to avail lower customs duty, although the imports effectively formed completely knocked-down (CKD) kits for vehicle assembly. While CKD kits can attract duties of 30% to 60%, separately shipped components reportedly face rates of five per cent to 15%.
They further alleged that Volkswagen used software to split orders for vehicle parts among suppliers in different countries, helping the company avoid the higher duty applicable to CKD kits.
The allegations emerged during a Directorate of Revenue Intelligence (DRI) investigation, which officials said found that the Aurangabad plant was carrying out basic vehicle assembly using imported kits.
The dispute over India’s biggest-ever import tax demand resumed last week after the Bombay High Court said in August that it would hear Volkswagen’s challenge afresh, as the judges had failed to deliver a ruling in time.
What happened at Thursday’s hearing?
On Thursday, the carmaker’s counsel, said tax authorities could not review 12 years of the company’s imports, as the law permits such scrutiny only for the preceding five years.
Representing the government, Additional Solicitor General argued that the carmaker did not provide the information sought in time, adding that no other automaker in the country importing parts had indulged in such misconduct.
The next hearing in the case has been scheduled for next week.
