Volkswagen urges Bombay HC to quash $1.4B tax notice
What's the story
German automotive giant Volkswagen has urged the Bombay High Court to quash a $1.4 billion show cause notice issued by Maharashtra's Office of the Commissioner of Customs.
The notice accuses Volkswagen of intentionally misclassifying imported car parts to benefit from lower duties.
The company has warned that if penalized, its total tax liability could double to $2.8 billion, describing this situation as a "matter of life and death."
Accusation
Company accused of misclassifying imported car parts
The Customs office claims that Volkswagen intentionally misclassified imported car parts to avail lower duties of 10-15%, instead of the applicable rate of 30-35%.
This, the customs authority said, has caused a huge loss to the national treasury.
However, Volkswagen denies the allegations and says it has always followed this classification practice across all its global manufacturing hubs including Mexico, Thailand, and Malaysia.
Precedent
Warning of dangerous precedent
Volkswagen has voiced concerns that a sudden change in the interpretation by a single officer could set a dangerous precedent.
The company argues that this could possibly affect not just Volkswagen, but the entire automobile industry in India.
It further claims that over 30,000 consignments have been processed using the same method without any issues, emphasizing its compliance with a 2011 notification governing duty rates.
Image
Volkswagen raises concerns over India's business-friendly image
Volkswagen has also expressed concerns over India's image as a business-friendly nation taking a hit.
The company had warned that an unpredictable tax environment could turn the country into a "laughing stock" and thwart efforts to improve the 'Ease of Doing Business' rankings.
The case is being heard in the Bombay HC, with further arguments scheduled for later today.