Prima Facie Unimpressed: Bombay HC On Volkswagen's Argument That Importing Parts Of Car Should Be Considered Import Of Individual Units

A 2011 notification taxes CKD units at 30%, while individual units are taxed at 10%. Volkswagen India's case is that it is only importing 'parts of the car' and not a 'car as a whole' and thus they cannot be taxed as per the rates for the CKD units.

Expressing prima facie dissatisfaction with the argument, a division bench of Justices Burgess Colabawalla and Firdosh Pooniwalla orally remarked “I can easily ask my supplier to supply in 4 different packages, in which case you will say easily this is a not a car, just parts. Effectively defeats the notification…there is a purpose for the notification.”

It also noted “CKD is that everything comes in one kit. Everything has to come in one go. And if it is brought separately, then you can never classify as a CKD. Prima facie we are not impressed with that argument because otherwise it is effectively defeating the very notification.”

The Court emphasized that if various car parts including the body, engines, panel and gearbox are imported and then assembled in India, treating them as individual units would defeat the very purpose of the notification. It noted that the investigation by the customs department indicates that 97% of car parts are imported and that it is only assembled in Aurangabad.

On Volkswagen's argument that the show cause notice is without jurisdiction on account of delay, the Court expressed reservations about entertaining the petition at a show cause notice stage.

It orally remarked “The officer has painstakingly gone through the each part number for each body. Each part has a KEN number and that KEN number is only associated with that body. He has done serious research in this matter before he was issued show cause notice. In a situation to entertain it at show cause notice stage…when all this material has come to knowledge…it is little troubling to us to entertain the petition at show cause notice stage is concerned. Address us on this issue.”

Additional Solicitor General N. Venkatraman continued his submissions for the Customs Department, while Senior Advocate Arvind Datar presented arguments for Volkswagen India.

The Court will continue hearing Volkswagen's arguments tomorrow.

Case title: Skoda Auto Volkswagen India Pvt. Ltd. vs. Union Of India And Ors (WP/2051/2025)

Previous hearings of the case can be accessed here and here.