MUMBAI: Volkswagen and Indian tax authorities faced off in court over a record $1.2 billion import tax demand, with the German automaker arguing that the government had exceeded the legal time limit for investigating its imports.
India has accused Volkswagen of undervaluing vehicle imports for years, alleging that the company declared shipments as individual car parts to benefit from lower import duties.
According to Indian authorities, Volkswagen paid tariffs of between five and 15 per cent by importing components separately, although the shipments allegedly contained almost entire vehicles in unassembled form, which should have attracted duties of 30 to 35 per cent.
Volkswagen has denied the allegations.
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During Thursday’s hearing at the Mumbai High Court, the company’s lawyer, Arvind Datar, argued that Indian law allowed tax authorities to investigate imports only for the preceding five years, rather than the 12 years covered by the demand.
However, Additional Solicitor General N. Venkataraman, representing the government, said Volkswagen had failed to provide the requested information within the required timeframe.
The dispute represents India’s largest-ever import tax demand and has become a significant challenge for Volkswagen’s operations in the country.
The company, which holds approximately two per cent of India’s car market, has described the financial implications of the case as potentially threatening the future of its Indian business.
The controversy also comes as Volkswagen explores a possible stake sale in its Indian operations to local conglomerate JSW.
The case has raised concerns among foreign investors over India’s import duty enforcement and lengthy tax disputes.
The Mumbai High Court is scheduled to hear the matter again on Tuesday next week.
