Volkswagen Imports Upto 99.7 Per Cent Parts Of Cars, Can't Play Victim Card: Customs Dept Tells Bombay High Court

While justifying its demand of $1.4 billion customs from Skoda Auto Volkswagen India, the Customs Authority on Thursday told the Bombay High Court that the German automaker was importing upto 99.7 per cent of the parts of various models of cars to its manufacturing plant in Aurangabad and thus were effectively importing an entire car itself. 

A division bench of Justices Burgess Colabawalla and Firdosh Pooniwalla was further informed that 10 other top automobile companies which were importing parts of their vehicles just the way Volkswagen does, were paying the customs duty at the rate of 30 per cent while the German automaker was only paying at the rate of 10 per cent. 

Additional Solicitor General N Venkatraman representing the Customs Authority, told the judges that the Volkswagen was trying to play the 'victim card' before the court. 

"Please note that they have two factories one is in Pune and the other in Aurangabad. We have not at all touched the Pune factory because it sources around 90 per cent material locally and its imports are only 7 to 10 per cent. But in Aurangabad, the imports are between 97.8 per cent to 99.7 per cent, which means they are effectively importing an entire car in parts and only assembling it here in Aurangabad," Venkatraman told the judges. 

Further, the ASG apprised the bench of the fact that top automobile companies like - Volvo, Mercedes, Maruti Suzuki, BMW, KIA, Hyundai, Renault, MG Motors, Isuzu Motors and BYD India have paid around 71.23k crores as customs because they too imported their parts classified as "completely knocked down" (CKD)  units.

"They all are paying customs duties at the rate of 30 per cent. Our stand is clear, if 10 individuals are following the law and the 11th one doesn't then we will issue a show cause notice.... They (Volkswagen) have misclassified their units and thus have not come clean before the court. They are saying that we are targeting them, that is life and death issue etc... All I can say is they cannot be play the victim card here...We are not targeting them instead we are only asking them to follow the law and pay lawful duties," Venkatraman told the judges. 

During the brief submissions, Venkatraman pointed out that at the Aurangabad plant, the company was only sourcing material like 'First Aid Kits, Cables, Dongles and Door Brackets etc (In some car models).

Explaining the procedure, the ASG highlighted the fact that usually the orders for a car are placed on an internal software of the company and accordingly, the spare parts are sent to 'consolidation centres' or the 'CKD centres' in countries like Germany and Mexico, then from there after all consolidating the parts, they are imported to India. 

"All these parts gets assimilated at one consolidation centre and then gets imported to India within 7 days...The Aurangabad plant doesn't play any role in this and it only waits for CKD Centre to send the materials which could be assembled...The CKD Centres (at Germany and Mexico) do the work of gathering and consolidating material meant for assembling the car...Before coming to India, it goes to one consolidation centre and then is supplied to India... It becomes a CKD even before the material hits Indian waters... Car body is fully made at the consolidation or CKD centres and dispatched to India," Venkatraman submitted. 

Further, to bring home his point that the German company is 'effectively' importing a car, Venkatraman told the judges that at the time of importing these 'parts' of the vehicles, the VIN (Vehicle Identification Number) and also the KEN number which helps in identifying which parts would be used for which specific car model. 

"So while importing only everything is fixed as to which car will have what parts and all those specific parts are numbers as per the car model and sent to India. Is this not importing a car itself?" the ASG argued. 

The bench will continue hearing the ASG on Friday.