Bombay High Court Challenges $1.4 Billion Customs Notice Against Skoda Auto Volkswagen India

The Bombay High Court has questioned the Customs department over a $1.4 billion tax demand from Skoda Auto Volkswagen India, alleged to be barred by limitation. The automaker is accused of misclassifying imports to incur lower customs duty, a charge they contest as outdated and unfair.

The Bombay High Court has directed the Customs department to submit an affidavit explaining their $1.4 billion tax demand against Skoda Auto Volkswagen India. The notice from September 2024 issues claims of misclassification on imports, which the automaker challenges as untimely and excessive.

A division bench, comprising Justices B P Colabawalla and Firdosh Pooniwalla, is extensively reviewing Skoda's plea to determine if the notice was barred by time limitations. Skoda contests the demand as arbitrary, indicating a decade-long adherence to the individual parts classification for taxes.

The controversy centers around the classification of imported components. Customs argues that the automaker miscategorized Audi, Skoda, and Volkswagen car imports as individual parts rather than CKD units, thereby avoiding higher duties. Skoda maintains that raising the tax demand now isn't justified. The court is focusing on the limitation aspect and the affidavit is due by March 10.

(With inputs from agencies.)