The Customs Department has urged the Bombay High Court to dismiss Skoda Auto Volkswagen India’s plea regarding a USD 1.4 billion tax demand, arguing that allowing the plea on the grounds of time limitation would have ‘catastrophic consequences.’
Earlier this month, the department filed its affidavit in response to Skoda’s petition, which challenges a show-cause notice issued in September 2024. A division bench of Justices BP Colabawalla and Firdosh Pooniwalla has been extensively hearing the automobile company’s plea, which claims the notice is arbitrary and illegal.
Last month, the court directed the department to file its affidavit explaining as to how its notice raising a tax demand of 1.4 billion dollar from Skoda Auto Volkswagen India was not barred by limitation.
In its affidavit, the department argued that granting relief to the company on this grounds would set a ‘bad precedent’ for car importers, potentially encouraging them to suppress critical information.
The affidavit further alleged that Skoda had delayed the inquiry by withholding data about its imports and providing misleading information regarding its import activities.
The Customs has claimed the company misclassified its imports of Audi, Skoda and Volkswagen cars as ‘individual parts’ instead of ‘completely knocked down’ (CKD) units, thereby paying significantly lower customs duties.
The company said the demand of over Rs12,000 crore was ‘exorbitant’.
Its counsel Arvind Datar had last month submitted to the court that the case was a ‘matter of life and death’ for its business in the country.
The main contention of the company was that the department could not have raised the tax demand after all these years.
As per the company, it has been been paying tax as per the individual parts category since over a decade.
To now suddenly say that tax ought to be paid as per the CKD unit category is not fair, the company’s counsel Arvind Datar had argued.
The authorities cannot demand such an exorbitant amount in 2024 after having cleared the company’s bills from 2011 till 2024 wherein tax was paid as per the individual parts component, he had said.
Additional Solicitor General N Venkatraman, appearing for the Customs, had last month said a thorough investigation was carried out by the department to understand and come to the conclusion that the company has to pay tax as per the CKD category.
The court will hear the matter on March 24.
