Skoda Auto Volkswagen Faces $1.4 Billion Tax Controversy in India

The Customs Department has asked the Bombay High Court to dismiss Skoda Auto Volkswagen India's plea against a $1.4 billion tax demand. Skoda is accused of misclassifying car imports to pay lower customs duties. The court is focused on whether the demand is barred by time limitation as pleaded by the company.

The Bombay High Court has been approached by the Customs Department to dismiss Skoda Auto Volkswagen India's plea against a colossal tax demand of USD 1.4 billion, citing time limitation as a reason for rejection. The department warns that accepting this plea could have 'catastrophic consequences.'

In its recent affidavit, the Customs Department argues that quashing the tax notice would set an unfavorable precedent, essentially enabling car importers to suppress vital information. Skoda allegedly misclassified its imports, particularly those of Audi, Skoda, and Volkswagen vehicles, as individual parts rather than 'Completely Knocked Down' units, leading to reduced customs duties.

The matter has been progressing in court, with focus primarily remaining on the point of limitation. Skoda contends that its tax calculations over the years adhered to department-approved categories. The court is set to hear this key argument in March, determining the validity of imposing such a large tax demand after clearing its previous bills for over a decade.

(With inputs from agencies.)