Volkswagen’s $1.4 Billion Tax Case to be Reheard by Bombay High Court

After a bench that had delayed rendering a decision for nearly 18 months dropped the case, citing heavy workloads and an inability to meet the deadline, the Bombay High Court will start over with Volkswagen's $1.4 billion (around INR 11,526 crore) customs tax dispute.

After hearing lengthy arguments on both sides, a bench consisting of Justices FP Pooniwalla and BP Colabawalla decided to hold off on rendering a judgement until February 26, 2025. Unfortunately, the deadline for receiving the verdict was missed.

Specifics that Made Bombay HC to Reconsider the Case

Informing the attorneys participating in the case that it was releasing the matter, the bench summoned them to its chamber on the evening of August 25. "Due to the exigency of work," the judges stated, they were unable to provide a ruling. The bench explained that they had been unable to provide a ruling thus far because of the pressing nature of the matter at hand. Under these conditions, the bench releases the issue in question, and it will now be scheduled for hearing before the regular court in accordance with the procedure for hearing Writ Petitions pertaining to indirect taxation.

Another bench that deals with tax issues will now hear the case. Both Volkswagen and the tax officials will need to start from the beginning when presenting their reasons. The court has granted Volkswagen an interim solution by ordering the status quo to be preserved for a period of four weeks. As a result, the business will have more time to contact the usual bench that deals with such cases. The importation of car parts for the Aurangabad factory is at the heart of the disagreement between customs officials and Skoda Auto Volkswagen India Pvt Ltd (SAVWIPL).

Authorities at customs have claimed that Volkswagen imported what were essentially Complete Knocked Down (CKD) kits used to build vehicles as individual components in order to pay a lesser customs charge. Customs duties ranging from 30% to 60% may be applied to CKD imports.

Further Allegations by Tax Authorities on Volkswagen

Volkswagen was accused by the authorities of utilising software to allocate parts orders to vendors in different nations. Thus, assisting the business in evading the higher tax that is levied on CKD kits. The claims surfaced as a result of an inquiry by the Directorate of Revenue Intelligence (DRI), which allegedly discovered that the facility in Aurangabad was doing basic vehicle assembly using kits supplied from elsewhere. The claims have been disputed by Volkswagen. On behalf of the company, Senior Advocate Arvind Datar contended that the show-cause notice was time-barred since the tax authorities had delayed issuing it.

Using a Revenue Secretary explanation from 2011 to back up its claim, the business has insisted that it lawfully imported individual automobile parts. The lengthy wait in finalising preliminary tax assessments, according to Volkswagen, prevented the company from recovering additional expenses from consumers. The $1.4 billion tax demand is therefore unreasonable.