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CompaniesNeha Joshi
3 min
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17 Feb 2025, 08:13 PM
ISTThe carmaker had approached the HC after the government demanded customs duty at completely knocked down rates on items imported over the past 12 years. (Mint)Summary
Skoda Auto allegedly used a software to break down vehicle orders into components and sub-assemblies, which were imported at a lower duty of 5-15%, instead of importing completely knocked down (CKD) kits and paying a 35% duty, according to the government.
The Union government told the Bombay High Court on Monday that no consignment belonging to Skoda Auto Volkswagen India Pvt. Ltd had been stopped or will be stopped over an import tax demand of $1.4 billion, which the carmaker has disputed.
The carmaker had approached the HC after the government demanded customs duty at CKD (completely knocked down) rates on items imported over the past 12 years. CKD implies importing all components of a car in an unassembled state, which can then be put together to get a functional vehicle.
The company’s counsel Arvind Datar told the court that the urgency for hearing this petition was that the company’s consignment had been stopped by the customs authorities at the port where the imports were stored. However, additional solicitor general (ASG) N. Venkatraman, representing the government, rejected the company’s contention. He told the court, with instructions from the tax authorities, that Skoda’s consignment had not been stopped and will not be stopped. This statement was recorded by the court, and the petition was posted for ASG’s arguments on 20 February.Dispute over import classificationThe carmaker stated in its petition that it uses NADIN software worldwide to track demand and plan production, which the taxman has misconstrued as a means to circumvent tax laws.
Skoda Auto allegedly used this software to break down vehicle orders into components and sub-assemblies, which were imported at a lower duty of 5-15%, instead of importing completely knocked down (CKD) kits and paying a 35% duty, according to the government. The court petition stated that these parts were then assembled locally into finished vehicles.
The dispute centred around whether these imports should be classified as CKD kits, which attract higher duties, or as standalone parts and components, which face a lower customs duty. Skoda’s petition says the taxman incorrectly interpreted the software as a means to break down the order for a car into separate parts, which are ordered from hundreds of suppliers around the globe, to the same effect as ordering CKD kits, to save on customs duty.Legal challengesThe tax notice to Skoda on 30 September 2024 challenges Skoda’s classification of parts and components imported for its Aurangabad factory. The government says these imports should be classified as CKD kits—unassembled motor vehicle parts—for cars produced between March 2012 and Jul
