The Customs authorities on Thursday told the Bombay High Court that the Volkswagen Group was at fault for failing to classify its imported goods properly which has led to the $1.4 billion tax demand against the auto giant..The fault was with the German automaker and it cannot now "play victim" in response to a notice of tax demand issued against it, Additional Solicitor General (ASG) N Venkataraman told the a Bench of Justices BP Colabawalla and Firdosh Pooniwalla. The ASG, representing the Customs authorities, argued that while at least 10 other companies including Volvo, Mercedes, Maruti Suzuki, BMW, and Kia Motors, are paying the correct 30% customs duty for CKD (Completely Knocked Down) imports, Volkswagen has been paying only 10%. He emphasized that these other companies are complying with the law, while Volkswagen has been underpaying. "We are not at fault for issuing the notice; it is your fault for not classifying the goods correctly," Venkataraman said. "You cannot play the victim here. When you don’t fall in line, the force of law will force you to fall in line," he added..As per the show cause notice (SCN), Volkswagen misclassified its imports of Audi, Škoda and Volkswagen vehicles as "individual parts" instead of CKD units, thus evading higher customs duties. The notice concerns approximately 33,000 transactions between 2012 and 2024.During the previous hearing, Volkswagen had questioned the Customs authorities' jurisdiction in issuing the notice after 12 years. The automaker had argued that the SCN was not only time-barred but also misconceived, since the automaker had consistently classified its imports as parts, not CKD units. Volkswagen had also highlighted a clarification sought in 2011 from the Revenue Secretary, which validated the company's classification of imports as parts.During Thursday's hearing, Volkswagen's counsel, Senior Advocate Rohan Shah, argued that the Customs authorities’ new classification of the imports — attempting to consolidate multiple bills of entry — was impermissible under the general clause of interpretation. He also pointed out that the lack of provisional assessments in over six months left the company unable to pass on the burden. "The fatality is I get the kind of situation I am in today. I can get a ₹12,000 crore demand with no means to pass on," Shah said. He did not engage with the merits of the show cause notice but focused on the jurisdiction of the authorities. .In response, ASG Venkataraman stated that Volkswagen had misled the court by not mentioning its plant in India with respect to which the show cause notice was issued. Volkswagen operates two plants in India - one in Aurangabad and the other in Pune.Venkataraman clarified that the notice pertains only to transactions involving the Aurangabad plant where cars are assembled but not manufactured. In contrast, the Pune plant manufactures over 90% of the parts domestically and imports only 7-8%."Volkswagen has two plants in India—one in Aurangabad and one in Pune. The SCN was issued only for transactions involving the Aurangabad plant, where only assembly of cars takes place and there is no manufacture. Around 2 lakh cars produced in the Pune plant remain outside the scope of this SCN; only 62 thousand cars assembled at the Aurangabad plant are under the scope of this SCN," he explained.Venkataraman further emphasized that the notice could not be considered time-barred since it was based on "new information" revealed after a Directorate of Revenue Intelligence (DRI) raid..The DRI investigation uncovered private records in which Volkswagen’s Managing Director admitted that the Aurangabad plant imports 97% of its parts with only assembly taking place there."It’s only when a DRI investigator sought this information that you provided it. They say the whole world we have announced that we are importing as parts. Did you show anything to the Revenue Secretary... customs department in 15 years?" he questioned.Additionally, Venkataraman argued that Volkswagen's claim that CKD provisions only apply when parts are imported in a single kit and not in different consignments, was not correct.He said that the intent of the law is to regulate imports where the assembly takes place in India. "These parts are fully manufactured and brought to a location, a consolidation centre/CKD centre in Germany, the Czech Republic, or other places based on the make and model of the car. They are then imported to India from the consolidation centre," he said. The ASG will continue his arguments on Friday.
The Customs authorities on Thursday told the Bombay High Court that the Volkswagen Group was at fault for failing to classify its imported goods properly which has led to the $1.4 billion tax demand against the auto giant..The fault was with the German automaker and it cannot now "play victim" in response to a notice of tax demand issued against it, Additional Solicitor General (ASG) N Venkataraman told the a Bench of Justices BP Colabawalla and Firdosh Pooniwalla. The ASG, representing the Customs authorities, argued that while at least 10 other companies including Volvo, Mercedes, Maruti Suzuki, BMW, and Kia Motors, are paying the correct 30% customs duty for CKD (Completely Knocked Down) imports, Volkswagen has been paying only 10%. He emphasized that these other companies are complying with the law, while Volkswagen has been underpaying. "We are not at fault for issuing the notice; it is your fault for not classifying the goods correctly," Venkataraman said. "You cannot play the victim here. When you don’t fall in line, the force of law will force you to fall in line," he added..As per the show cause notice (SCN), Volkswagen misclassified its imports of Audi, Škoda and Volkswagen vehicles as "individual parts" instead of CKD units, thus evading higher customs duties. The notice concerns approximately 33,000 transactions between 2012 and 2024.During the previous hearing, Volkswagen had questioned the Customs authorities' jurisdiction in issuing the notice after 12 years. The automaker had argued that the SCN was not only time-barred but also misconceived, since the automaker had consistently classified its imports as parts, not CKD units. Volkswagen had also highlighted a clarification sought in 2011 from the Revenue Secretary, which validated the company's classification of imports as parts.During Thursday's hearing, Volkswagen's counsel, Senior Advocate Rohan Shah, argued that the Customs authorities’ new classification of the imports — attempting to consolidate multiple bills of entry — was impermissible under the general clause of interpretation. He also pointed out that the lack of provisional assessments in over six months left the company unable to pass on the burden. "The fatality is I get the kind of situation I am in today. I can get a ₹12,000 crore demand with no means to pass on," Shah said. He did not engage with the merits of the show cause notice but focused on the jurisdiction of the authorities. .In response, ASG Venkataraman stated that Volkswagen had misled the court by not mentioning its plant in India with respect to which the show cause notice was issued. Volkswagen operates two plants in India - one in Aurangabad and the other in Pune.Venkataraman clarified that the notice pertains only to transactions involving the Aurangabad plant where cars are assembled but not manufactured. In contrast, the Pune plant manufactures over 90% of the parts domestically and imports only 7-8%."Volkswagen has two plants in India—one in Aurangabad and one in Pune. The SCN was issued only for transactions involving the Aurangabad plant, where only assembly of cars takes place and there is no manufacture. Around 2 lakh cars produced in the Pune plant remain outside the scope of this SCN; only 62 thousand cars assembled at the Aurangabad plant are under the scope of this SCN," he explained.Venkataraman further emphasized that the notice could not be considered time-barred since it was based on "new information" revealed after a Directorate of Revenue Intelligence (DRI) raid..The DRI investigation uncovered private records in which Volkswagen’s Managing Director admitted that the Aurangabad plant imports 97% of its parts with only assembly taking place there."It’s only when a DRI investigator sought this information that you provided it. They say the whole world we have announced that we are importing as parts. Did you show anything to the Revenue Secretary... customs department in 15 years?" he questioned.Additionally, Venkataraman argued that Volkswagen's claim that CKD provisions only apply when parts are imported in a single kit and not in different consignments, was not correct.He said that the intent of the law is to regulate imports where the assembly takes place in India. "These parts are fully manufactured and brought to a location, a consolidation centre/CKD centre in Germany, the Czech Republic, or other places based on the make and model of the car. They are then imported to India from the consolidation centre," he said. The ASG will continue his arguments on Friday.