The Government of India does not want to let Volkswagen walk away from the $1.4 billion tax bill, the Customs Department made it clear when responding to the High Court in Mumbai set to hear the case.
This follows revelations from a damning probe by the customs department, which uncovered that Skoda Auto Volkswagen India allegedly paid only $981 million of the $2.35 billion owed in import duties since 2012.
Responding to a show cause notice back in December 2024, the India unit of the German automotive group Volkswagen stated that it intended to fully cooperate with Indian authorities. “We are analysing the notice and extending our full cooperation to the authorities,” Skoda Auto Volkswagen India had then said in a statement.
The customs department investigation was regarding the group’s cars brought to India via the CKD (completely knocked down) route. In India, the group sold various models under the Audi, VW, and Skoda brands that were imported as CKD units and later assembled in India. Skoda Auto Volkswagen India also offered CKD models such as Octavia, Superb, Kodiaq, Passat, Jetta, and Tiguan over the years.
The tax notice alleged that the group imported CKD units but declared them as “individual components” to defraud the authorities. Import duties for parts in India are only from 5 per cent to 15 per cent. This is much lower than the 30–35 per cent tax levied on CKD units.
The VW group challenged the notice in court demanding to quash it citing "inaction and tardiness" by tax officials, thereby delaying shipment reviews. The customs department refuted it with a 78-page reply stating that Volkswagen caused the delays by producing information in sets and withholding key imports data.
However, last month, a division bench of Justices B.P. Colabawalla and Firdosh Pooniwalla in the High Court told Skoda Auto Volkswagen India, “Prima facie, we are not satisfied with your argument.”
The government body, in its reply, told the court that if it accepts VW Group’s reasoning, it would set a bad precedent for car importers to suppress critical information, and then blame it on the tax authority arguing that the time-limit to conduct a probe is over (statute of limitations). This would lead to “catastrophic consequences”, the Centre said in the filing to the court.
The case is scheduled to be heard on Monday, and if found guilty, Skoda Auto Volkswagen India might face a tax bill to the tune of a whopping $2.8 billion (inclusive of penalty and interest).
The carmaker called the case a “matter of life and death” for its business in the country.
