[Nithesh_M]

If the GOI really wanted to crack down on underreporting of import invoices and mislabeling of items, why did it make it illegal for public to view and publish import export data from websites like Zauba in the first place? Any member of the public could have flagged this issue a lot sooner if it was still open to do so.

https://indianexpress.com/article/bu...arity-7758862/

[sukarsan]

I have worked in a German OEM, and things do not look good for VW here.
To me, it is clear that there has been a misclassification—parts used to build a car were shipped as spares.

VW can claim that this was in agreement with the Government of India, but it is their responsibility to ensure legal compliance while selling in India.

It looks like there was some greasing of government officials to look the other way. Earlier, European governments used to ignore bribery when it occurred outside their borders. However, in the past decade, compliance has improved, and such practices are no longer encouraged. There are dedicated whistleblower cells within organizations to ensure such practices do not lead to legal issues.

[Amby955]

I genuinely hope that Volkswagen wins this lawsuit. The company imported car parts in a way that attracted lower taxes compared to full vehicle/parts imports, I don't think its illegal, they acted smart while being within the law. But ultimately these parts still required assembly, which created jobs and supported local industries, benefiting both the community and local authorities, also the consumers who could afford cheaper parts. Given that Volkswagen had kept the government informed of this practice and received clarifications in the past, imposing fines for the last 10 years seems excessive, especially when no issues were raised earlier. This legal battle could hurt Volkswagen’s competitiveness in India.

This not just hurts VW India, but also other businesses planning to enter the Indian market and businesses already operating here would be skeptical about investing more. Similar things happened with Vodafone earlier. Ultimate losers here would be the Indian consumers.

[srh]

Originally Posted by Amby955

I genuinely hope that Volkswagen wins this lawsuit. The company imported car parts in a way that attracted lower taxes compared to full vehicle/parts imports, I don't think its illegal, they acted smart while being within the law.

It is illegal. Apart from the HSN code, duty is also influenced by the end use. And clearly the end use of an item as spare part and as a part of assembly are are different as chalk and cheese. VW needs to pay up - they committed a fraud. And this couldn't have happened inadvertently. Either some tax consultant/ local tax team misguided them or someone at the top globally was in the know of it and approved it.

Originally Posted by somersault

Now the tax department is going to govern how we do our business within the available legal frame?

This is at the same weird level where, say in Mumbai, BMC could raise a tax notice for avoiding Octroi tax on companies, whose offices are registered in Mumbai but go-downs are outside Mumbai. They may claim that the companies purposely avoided Octroi and hence made a loss of revenue to the BMC.

Moot point being that this is hardly within the available legal frame. Classification scheme for customs duties, apart from HSN code can also include end use considerations. And VW's scheme certainly fails the end use test.

And Octroi was based on physical entry and sale within a jurisdiction. In an equivalence to VW, if someone claims that goods entering the jurisdiction are just on an onward journey to some other place, but ends up selling them within the jurisdiction, they are committing fraud.

[somersault]

Originally Posted by srh

Classification scheme for customs duties, apart from HSN code can also include end use considerations. And VW's scheme certainly fails the end use test.

That's my point. The details are in the explanation of the law or HSN or both. In this case, I believe there is a lack of explanation on law or the HSN. So anyone can apply the mind in whatever way they want. Ease of Business goes for toss.

[srh]

Originally Posted by somersault

That's my point. The details are in the explanation of the law or HSN or both. In this case, I believe there is a lack of explanation on law or the HSN. So anyone can apply the mind in whatever way they want. Ease of Business goes for toss.

The very fact that we have different rate for parts/ CKDs/ SKDs/ CBU indicate that the end use is considered when levying customs duties. There is no further explanation required. Its fairly black or white. Only a criminal mind would want to interpret it differently.

[somersault]

Originally Posted by srh

The very fact that we have different rate for parts/ CKDs/ SKDs/ CBU indicate that the end use is considered when levying customs duties. There is no further explanation required. Its fairly black or white. Only a criminal mind would want to interpret it differently.

While such kind of explanations do not stand in the court of law. The tax department has to show the intend (and not derive it) and also how it is achieved. It will be interesting to check how the court takes the stand on this.

And yes, Criminal Mind? seriously?? If that is how government thinks into such ambiguities, then it again shows that Ease of Business goes for the Toss.

[carcrazeking]

Hope this ends in favor of VW. Already they are struggling in the market with poor sales and support. It will only worsen for VW customers. 1.4 Billion even for a giant like VW it is a big slap

[Tgo]

Reminds me of the classic ALI EXPRESS ban.

Listings on their website always contained a free gift. Buy a set of watch straps you got the tools to replace it as a free gift. Buy a phone case, you got a screen guard as a free gift.


Cunningly enough, by the time you received the order, the shipment details were changed and the item read as “watch straps gift” completely dodging the import tax since gifts are not taxed.

VW has a history of dubious practices even though they have technological superior products. I’ve also seen their attitude towards customers before and after sales. Not to mention the fact that parts imported through this software trick would have zero “made for India” engineering modifications giving customers endless nightmares with major component failures, I stand with GOI on this one.

[srh]

Originally Posted by somersault

And yes, Criminal Mind? seriously?? If that is how government thinks into such ambiguities, then it again shows that Ease of Business goes for the Toss.

EODB doesn't mean operating like the wild wild west or the era of the robber barons. Yup, this is certainly a criminal mind at work implementing a well thought scheme to deceive and defraud.

And generating economic activity/ employment cannot be a justification to condone this.

[Freespirit27]

Volkswagen sues! More like files relief for tax evasion That is a clickbait being used in a thread title!

ET says "Volkswagen is facing a $1.4 bn tax dispute with the Indian government over alleged import tax evasion for its car parts. The company claims it followed import regulations and this notice contradicts previous government clarifications. Volkswagen has filed a case in the Bombay High Court to challenge the massive tax demand."
Link- https://www.google.com/amp/s/m.econo.../117888885.cms

Barring a few narrative peddlers the case is a point of view of what VW views as CKD and Spares as against the import norms.
Knowing their history in EU on the emission scams I guess, this is just the VW legal team and finance trying to get away from a hit job.
If you deal in a country, deal by their rules - claiming 'ease of doing buisness' to violate laws is plain daylight robbery.

[Quoter]

Originally Posted by Amby955

I genuinely hope that Volkswagen wins this lawsuit. The company imported car parts in a way that attracted lower taxes compared to full vehicle/parts imports, I don't think its illegal, they acted smart while being within the law.

They clearly violated the spirit of the law. There is a differential duty structure for CKD kits and spare parts. If you import parts separately and use them the same way as a CKD kit, you are clearly violating the entire purpose of a differential duty structure.
It is up to the courts to now determine the exact language in the law and what documentary evidence can be presented to establish this practice by the VW group. We should not rush to declare either side guilty or innocent

[anjan_c2007]

A news update from the court today, stating that the civil suit will be next heard on 17.02.25.

The Bombay High Court will hear Skoda Volkswagen India’s challenge to a $1.4 billion tax demand by Indian customs authorities on February 17.

A Division Bench of Justice BP Colabawalla and Justice Firdosh Pooniwalla agreed to take up the matter next week after the company's counsel, Naresh Thacker and Gopal Mundhra, mentioned it before the bench on Wednesday.

Details on the link:-
https://www.barandbench.com/news/bom...dispute-feb-17

[ishekk]

Originally Posted by srh

It is illegal. Apart from the HSN code, duty is also influenced by the end use. And clearly the end use of an item as spare part and as a part of assembly are are different as chalk and cheese. VW needs to pay up - they committed a fraud. And this couldn't have happened inadvertently. Either some tax consultant/ local tax team misguided them or someone at the top globally was in the know of it and approved it.

Volkswagen did not import parts as spare parts but just as car parts. Please don't spread misinformation.

When a company assembles a car, it needs many parts. Some would be sourced from India & some from outside. A company might source its engine or transmission or steering or any other part you can think of from outside India. On these parts import duty is usually around 15% as compared to uniform 35% on parts imported as CKD kit.

There is nothing in the law which states that a company has to source some(say 10%) of the components of the car from within India when assembling a car. And this is major flaw in the law. In fact they had taken clarification from the government for this back in 2011.

Mercedes pays 35% import duty on parts. But its car actually arrive as one CKD kit at the port and then the kit is transported as a single unit to the plant to get assembled. And this goes by the definition of CKD, completely knocked down unit: A car which was broken down just to get assembled again. Here government will also have to prove that all the parts imported were once part of one car.

Volkswagen might not have followed the law in spirit but I think tax laws are followed by what is written in them. That's why we have CAs & tax consultants every where. I give 2 examples:

1) AGR dues case: Forget Vodafone's non telecom revenue, even completely non telecom companies like L&T finance, Gujarat Narmada Fertilzers are asked to share their revenue with the Government just because they happened to have telecom license. Why? Just because if the wording of the law.

2)Old tax regime: In AY 2024-25, the option to fill return under old tax regime just went away if you did not fill the return before due date. Does it makes any sense? Atleast not to me. If we go by spirit of law then there is a provision of penalty and penalty should have been imposed. But government did not do anything but forcefully collected tax under new tax regime along with the penalty.

[CARDEEP]

You have to follow the law of the land, & cannot interpret the law to one's interpretation. What VW did was mischievous/ beneficial interpretation. One court ruled against it based on evidences & I fear the other would tow the same line.

VW is facing problems worldwide & this is just an excuse/ ruse for them for not paying taxes &/ or running away. They are selling assets & market share has dipped in Germany too. It is matter of days when they would just make an announcement to pack up.

Unfortunately, we will miss their superior DCT gearboxes & much better build + ride combo.