High Stakes in Court: Skoda Volkswagen's Tax Dispute with Indian Customs

Skoda Auto Volkswagen India faces a $1.4 billion tax demand for allegedly importing car parts as individual units instead of 'completely knocked down' units. This classification resulted in significantly lower import duties. The Bombay High Court is hearing the company's challenge against the notice, deemed 'arbitrary' and 'illegal.'

Skoda Auto Volkswagen India is embroiled in a significant tax dispute with the Indian customs department, facing a demand of $1.4 billion. The controversy revolves around the classification of imported car parts as individual units instead of 'completely knocked down' (CKD) units, which attract higher import duties.

The German automaker contested the notice in the Bombay High Court, branding it 'arbitrary' and 'illegal.' The court explored whether importing nearly all components except a crucial part, like a gearbox, could avoid CKD classification. Justices B P Colabawalla and Firdosh Pooniwalla will continue the hearing on February 20.

Despite the ongoing legal battle, the customs department has confirmed that it hasn't halted any shipments from Skoda and will not do so. Meanwhile, Skoda's counsel argues the company has adhered to the parts classification for years, challenging the sudden regulatory shift in 2024.