The Bombay High Court will re-hear Volkswagen’s $1.4 billion (around Rs 11,526 crore) customs tax dispute from scratch after the bench that had reserved its judgment nearly 18 months ago released the case, citing its workload and inability to deliver the verdict within the prescribed timeline.
A bench of Justices BP Colabawalla and FP Pooniwalla had reserved its judgment on February 26, 2025, after hearing detailed arguments from both sides. However, the verdict was not delivered within the stipulated period.
On Tuesday evening, the bench called the lawyers involved in the case to its chamber and informed them that it was releasing the matter. The judges said they had been unable to pronounce the judgment “due to the exigency of work”.
“Due to the exigency of work we have not been able to pronounce judgment till date. In these circumstances, we release the above matter, and which shall now be placed for hearing before the regular Bench as per the roaster hearing Writ Petitions arising from indirect taxes,” the bench said.
The case will now go before another bench handling tax matters, where Volkswagen and the tax authorities will have to present their arguments all over again.
For now, the court has given Volkswagen temporary relief by directing that the existing situation be maintained for four weeks, allowing the company time to approach the regular bench handling such matters.
The dispute involves Skoda Auto Volkswagen India Pvt Ltd (SAVWIPL) and customs authorities over the classification and taxation of vehicle parts imported for the company’s Aurangabad plant.
Customs authorities have alleged that Volkswagen imported vehicle parts as individual components to pay lower customs duty, while they were effectively Complete Knocked Down (CKD) kits used to assemble cars. CKD imports can attract customs duty of 30% to 60%.
The authorities have also alleged that Volkswagen used software to divide orders for vehicle parts among suppliers in different countries, helping the company avoid the higher duty applicable to CKD kits.
The allegations emerged during a Directorate of Revenue Intelligence (DRI) investigation, which officials said found that the Aurangabad plant was carrying out basic assembly of vehicles using imported kits.
Volkswagen has denied the allegations. Senior Advocate Arvind Datar, appearing for the company, argued that the tax authorities had taken too long to issue the show-cause notice, making it time-barred.
The company has maintained that it legitimately imported individual vehicle parts and relied on a 2011 clarification issued by the Revenue Secretary in support of its position.
Volkswagen has also argued that the long delay in completing provisional tax assessments left it unable to recover additional costs from customers, making the $1.4 billion tax demand unfair.
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Published By:
Shipra Parashar
Published On:
Aug 25, 2026 23:02 IST
