‘Skoda Volkswagen will have to fall in line and not play victim’: Customs dept to Bombay High Court

Customs Department has told the Bombay High Court that Skoda Volkswagen will have to fall in line. The department was justifying its $1.4-billion tax demand.

The Customs Department told the Bombay High Court that Skoda Volkswagen will have to fall in line and not play the “victim”. The department was justifying the $1.4-billion tax demand notice it sent to the company for allegedly evading tax by wrongly classifying imports.

The Customs Department, while justifying its $1.4-billion tax demand notice to Skoda Volkswagen, said the company will have to stop playing the "victim". (Reuters)

Additional Solicitor General N Venkatraman told the court that the rule of law is the same for everyone and that the department was not at fault for issuing the tax demand notice to the company, news agency PTI reported.

“You have to follow the law. You have to fall in line…Similar importers are already paying 30%. It is not our fault for issuing this show cause notice,” he said in his arguments before a divisional bench of Justices BP Colabawalla and Firdosh Pooniwalla.

“It is the company's fault for not classifying the items properly. Don't be the victim here. If you don't follow the law, then we will initiate action in accordance with the provisions of law,” Venkatraman said.

The court was hearing a plea filed by the automobile manufacturer challenging the tax demand notice sent by the Customs Department. The company had earlier called the dispute over the tax demand a “life and death” battle for its operations in India and had termed the demand notice “arbitrary and illegal”.

The department had informed the court on Monday that no consignment of the company has been or will be stopped following the demand notice. The court had then noted, “You (Skoda Volkswagen) bring all the components except for one. Let's say the gear box. You would still fall under the parts component and submit import duty at a lower rate. That is just clever tax planning.”

Customs department has claimed that the company misclassified imports of Audi, Skoda and Volkswagen cars as ‘individual parts’ instead of ‘completely knocked down’ (CKD) units. This, according to the allegatons, allowed the company to pay significantly lower customs duties. While CKD units attract 30-35% tax, separately imported parts attract only 5-15% customers duties.