India Defends 11,000 Crore Rupee Customs Claim Against Volkswagen
Key Facts
The Indian government defended a record customs claim of 11,000 crore rupees against German company Volkswagen before the Bombay High Court on Thursday, October 29, saying the company had not provided the required information on time. The case concerns imports of components for the Aurangabad plant of Skoda Auto Volkswagen India and their classification for customs purposes. Authorities say shipments treated as separate parts were in fact near-complete car kits intended for assembly. Volkswagen denies the allegations and argued before the court that the claim was time-barred. Reuters put the claim at about $1.2 billion, while a Moneycontrol report described the customs notice issued in September 2024 as seeking about 11,526 crore rupees plus interest.
The dispute stems from a government allegation made in 2024 that Volkswagen had undervalued its car imports for years, enabling it to pay less duty than owed, a charge the company denies. India says the company declared imports as individual car parts subject to a tariff of between 5% and 15%, while, in the authorities' description, it was importing “almost the entire car” in an unassembled state. On that classification, the authorities say the imports should have faced a tariff of between 30% and 35%. A Live Mint report says duties on completely knocked-down car kits can range from 30% to 60%, compared with 5% to 15% for components shipped separately. The dispute therefore centers on whether the shipments were separate parts or assembly kits, a distinction that changes the tariff category applied to them.
According to Moneycontrol, the customs notice covers components the company imported for its Aurangabad plant between March 2012 and July 2024. Volkswagen's lawyer said the authorities could not review imports spanning 12 years, arguing that the law allows an audit of only the previous five years. The government's representative, in turn, said the company had not provided the required information on time. He said other car companies importing parts into India had not engaged in the same conduct, an argument supporting the government's position on how the company handled information requests. The procedural issue remains tied to the substance of the dispute, with each side arguing over what the audit rules require and what was submitted to the authorities.
The appeal returned to argument after its earlier judicial course stalled. A two-judge bench had heard the case for six days before reserving judgment on February 26, 2025. But when the case returned to it on August 25, 2026, the bench decided to release it without delivering a ruling, and it was referred for a hearing before another bench. The Bombay High Court said in August it would rehear Volkswagen's appeal because the judges had not issued a ruling in time. After Thursday's hearing, Tuesday of the following week was set for the next hearing, Reuters reported.
The dispute is a burden on Volkswagen as it holds talks with JSW Group to sell a stake in its Indian operations, Reuters reported. The company's market share in India is about 2%, according to the report, in a market Reuters described as the world's third-largest auto market. EL7 reported on October 23 that Volkswagen had paused new investment in its Indian electric-vehicle program while it awaited a partnership. This places the case within a broader review of the company's local presence, as talks over a stake sale and the court proceedings continue. The customs claim remains before the court, which is due to resume hearings on the scheduled date next week.
In separate data unrelated to the dispute, India's Ministry of Statistics said the industrial production index rose 6.7% year on year in September 2026, compared with growth of 8.0% in August in the previous quick estimate. Manufacturing grew 7.6% year on year in September, while electricity and gas output rose 11.2%. The figures offer a picture of the pace of industrial activity in India, without the ministry linking them to the Volkswagen case. As for the stock, EL7 data showed Volkswagen's American depositary receipts closing at $7.64 on October 23 and October 26, then at $7.58 on October 27 and $7.73 on October 28. The closing price was $7.79 on October 29, while the ministry set November 30, 2026, as the release date for October industrial production data.