The Bombay High Court, while hearing Skoda Auto Volkswagen India's petition against a USD 1.4 billion tax demand by Indian Customs authorities, has directed the Customs Authority to submit an affidavit clarifying why the show-cause notice issued in September 2024 is not time-barred.

“…on the issue of limitation which is factual, please file a short affidavit setting out how limitation does not arise” a division bench of Justices Burgess Colabawalla and Firdosh Pooniwalla said.

The Court directed Additional Solicitor General (ASG) N. Venkatraman, representing the Customs department, to file an affidavit clarifying whether the limitation period begins from the initiation of the provisional assessment by the authority or from the commencement of the investigation.

The Court stated that it would issue orders solely on the limitation issue, emphasizing, “Though we have heard extensive arguments on all matters, we are only deciding the limitation issue as it goes to the root of the case.”

During the hearing, the Court questioned the ASG on whether the Customs Department could retrospectively examine records from 12 years ago under the pretext of an incomplete provisional assessment. In response, the ASG contended that, under the Customs Act, the limitation period is determined by the date of finalization of the assessment.

He argued that Volkswagen had failed to furnish the necessary documents and data to the Customs Authority and pointed out that, as recently as February 5, 2025, the company had yet to provide all required documents. Therefore, he asserted, the Customs Authority is not restricted by limitation.

Volkswagen India contends that the show-cause notice is without jurisdiction due to the delay. In previous hearings, the company argued that it had been importing parts since 2001, yet the Customs Authority arbitrarily reclassified the imports as Completely Knocked Down (CKD) units only in 2024 before issuing the notice.  

The Court has directed the Customs Authority to file the affidavit by March 10.

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