The Centre has defended its approximately ₹11,000 crore customs duty demand against Volkswagen before the Bombay High Court, while the German automaker has questioned the legality of examining import transactions dating back 12 years.
During Thursday’s hearing, senior advocate Arvind Datar, appearing for Volkswagen, argued that the authorities had exceeded the permissible period for scrutinising imports. Additional Solicitor General N. Venkataraman, representing the government, countered that the company had failed to provide the information sought within the required time. Volkswagen continues to deny the allegations.
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The carmaker’s challenge places limitation at the centre of the proceedings. Datar submitted that customs authorities could look back only five years and could not examine imports spanning 12 years to raise the disputed demand.
Volkswagen’s position is that the proceedings were initiated too late in relation to the transactions under examination. The government, however, relied on the alleged delay in furnishing information to oppose the company’s challenge.
These remain competing submissions before the High Court. The reported hearing did not establish that the demand was time-barred or that delayed disclosure legally justified the period covered by the authorities.
Venkataraman argued that Volkswagen had not supplied the required information on time. He also alleged that other automakers importing vehicle components into India had not engaged in comparable misconduct.
The government’s submissions seek to defend the demand against the company’s procedural challenge. Its allegations concerning Volkswagen’s conduct remain contested and should not be treated as findings of the court.
The underlying controversy involves Skoda Auto Volkswagen India Pvt Ltd and the classification of vehicle components imported for its Aurangabad manufacturing facility.
Authorities allege that the company imported components as separate automotive parts even though the shipments effectively constituted completely knocked-down, or CKD, kits used to assemble vehicles.
This classification has significant consequences for customs duty. Separately imported components may attract lower duties than vehicle kits, depending on the applicable tariff entries, notifications and condition of the imported goods.
The central allegation is that Volkswagen’s import arrangements resulted in payment of lower duties than those applicable to the goods as characterised by the department. Volkswagen disputes that allegation.
According to the reported background, customs authorities also alleged that Volkswagen used software to divide orders for vehicle components among suppliers in different countries.
The department’s case is that the arrangement enabled imports to be declared as individual components while collectively supplying the parts required for vehicle assembly.
The allegations arose from a Directorate of Revenue Intelligence investigation. Officials reportedly concluded that the Aurangabad facility was undertaking basic assembly using imported kits.
However, the investigation and issuance of a duty demand do not themselves establish unlawful classification. The company’s challenge remains pending before the High Court.
Apart from the classification dispute, the proceedings raise a separate question about the period for which customs authorities can pursue the disputed liability.
Volkswagen’s limitation objection challenges the timing and reach of the demand. The government’s response focuses on the company’s alleged failure to provide information when sought.
The High Court will have to consider these submissions within the legal framework applicable to the proceedings. Neither side’s argument, as reported, amounts to a final determination of the company’s liability.
The dispute returned for fresh hearings after the Bombay High Court decided in August to rehear Volkswagen’s challenge because the earlier bench had not delivered its ruling within the required time.
That procedural development reopened the hearing of the challenge; it did not settle the merits of the customs allegations or the limitation objection.
The proceedings therefore continue with both the validity of the demand and the company’s objections unresolved.
The demand represents substantial financial exposure for Volkswagen’s Indian operations. The company has previously described the potential impact in exceptionally serious terms.
The litigation also comes against the backdrop of reported discussions with JSW Group concerning a possible stake sale in Volkswagen’s local operations.
Beyond the immediate parties, the dispute highlights the commercial importance of customs classification for manufacturers importing components for domestic assembly. It also underscores the consequences of prolonged uncertainty over import assessments and duty liabilities.
The matter is scheduled to be heard next on Tuesday, November 3, 2026. The High Court has yet to decide the challenge, and Thursday’s proceedings concerned the parties’ arguments rather than a final ruling on the demand.
