Volkswagen finds itself in hot water as Indian customs authorities push back against its claims, asserting that the auto giant is solely responsible for a $1.4 billion tax demand due to misclassification of its imports.
During a hearing at the Bombay High Court, Additional Solicitor General (ASG) N Venkataraman did not mince words, arguing that Volkswagen had consistently underpaid customs duties by classifying its Completely Knocked Down (CKD) imports as individual parts—resulting in a significantly lower tax rate.
“At least 10 other companies, including Volvo, Mercedes, Maruti Suzuki, BMW, and Kia Motors, are paying the correct 30% duty. Volkswagen, however, has only been paying 10%. They cannot play the victim now,” Venkataraman told the court.
The dispute centers on approximately 33,000 transactions spanning from 2012 to 2024. According to customs authorities, Volkswagen’s Aurangabad plant—where vehicles are assembled but not manufactured—was the focal point of the misclassification. In contrast, its Pune plant, which produces most of its components domestically, remains outside the scope of the investigation.
Volkswagen had earlier challenged the customs notice, arguing that it was issued after an unreasonable delay and that the company had always classified its imports in accordance with past clarifications from the Revenue Secretary. However, authorities maintain that the notice was prompted by fresh revelations following a Directorate of Revenue Intelligence (DRI) probe.
The investigation reportedly uncovered internal records in which Volkswagen’s top executives admitted that 97% of parts used at the Aurangabad facility were imported, with minimal local manufacturing.
“This isn’t about new rules—it’s about enforcing existing ones. If you don’t fall in line, the force of law will make you fall in line,” Venkataraman warned.
The legal battle continues, with the ASG set to present further arguments in the next hearing.