Justices BP Colabawalla and Firdosh Pooniwalla, after six days of arguments, stated, “Although we have heard extensively on all the issues, we will pass orders only on the issue of limitation.” This means the court will rule solely on whether the customs authorities met the deadline for issuing the tax demand against the German automaker, as per the hearing’s conclusion.
The case stems from a show-cause notice by Indian Customs, asserting that Volkswagen wrongly declared imports of Audi, Škoda, and Volkswagen vehicles as separate parts rather than Completely Knocked Down (CKD) units, which carry higher duties.
This notice, targeting around 33,000 transactions, relates primarily to the Aurangabad plant, where customs claims nearly all components are imported for assembly. The authorities argue that Volkswagen misrepresented items like pre-assembled engines and gearboxes, qualifying them for duties of 30% or 60% if attached to a chassis, according to the SCN details.
Volkswagen’s legal counsel, Senior Advocate Arvind Datar, contended that the notice, delivered after a 12-year gap, exceeds the legal timeframe. Datar explained that the company always imported components as parts, not CKD units, a practice supported by a 2011 revenue secretary clarification.
He labelled the $1.4 billion demand unreasonable, stating, “It is life and death for us,” and highlighted that unfinished provisional assessments prevented Volkswagen from transferring the tax cost, as argued in court.
Additional Solicitor General N Venkataraman, for customs, responded that Volkswagen deliberately mislabelled its imports and withheld critical information. He said, “We are not at fault for issuing the notice; it is your fault for not classifying the goods correctly.”
Venkataraman noted the notice followed fresh evidence from a Directorate of Revenue Intelligence raid, during which Volkswagen’s Managing Director reportedly confirmed that the Aurangabad plant imported 97% of its parts. He defended India’s tax authority, saying, “Merely because you bring investment, it cannot be an erosion of sovereign space,” per his courtroom statements.
The court allowed customs until 10 March to address Volkswagen’s assertion that no document requests were made before 2023, as directed in the hearing.
