Delhi, 26 February (H.S.): The Bombay High Court on Wednesday concluded hearings in auto giant Volkswagen's $1.4 billion tax dispute with Indian customs authorities.

Pertinently, the Court said it will only decide on the issue of limitation, i.e. whether the customs authorities failed to adhere to the deadline set by the law for raising the tax demand.

After six days of extensive arguments, the Bench of Justice BP Colabawalla and Firdosh Pooniwalla emphasised that the ruling will be limited to whether the show-cause notice (SCN) issued by the customs authorities against the automotive company was time-barred.

Although we have heard extensively on all the issues, we will pass orders only on the issue of limitation, the Court stated.

The dispute revolves around the show cause notice issued by Indian Customs, alleging that Volkswagen misclassified its imports of Audi, Škoda, and Volkswagen vehicles as individual parts rather than Completely Knocked Down (CKD) units, which attract higher customs duties. The SCN covers approximately 33,000 transactions under scrutiny.

Volkswagen’s legal team led by Senior Advocate Arvind Datar argued that the show cause notice was issued after a 12-year delay, making it time-barred.“It is life and death for us,” Datar said, stressing how crucial the case is to Volkswagen’s operations in India.

He criticized the 1.4 billion USD demand as unreasonable, questioning how the company could be expected to pay such a sum after over a decade of consistent classifications.

Merely because you bring investment, it cannot be an erosion of sovereign space. We as a nation cannot compromise on sovereignty in taxation and regulatory matters,Venkataraman said.

During the raid, Volkswagen’s Managing Director allegedly admitted that the Aurangabad plant imported 97% of its parts for assembly.

Venkataraman argued that the customs authorities had acted within their rights to issue the notice and criticized Volkswagen for not fully disclosing its operations.

Hindusthan Samachar / Jun Sarkar