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Releases Skoda Volkswagen Tax Case Due to Delay in Pronouncing Verdict
In a significant procedural turn, the has released the ₹11,526 crore ($1.4 billion) customs duty case against nearly 18 months after reserving judgment, directing that the matter be before a new bench. The bench comprising Justices B.P. Colabawalla and Firdosh P. Pooniwalla acknowledged that it could not deliver a verdict within the timelines prescribed by the .
The Long Wait for a Verdict
The
, challenging a massive customs duty demand over the classification of imported vehicle parts, was
on
after extensive arguments. However, in an order dated
, the bench noted it had been unable to
"due to the
."
Citing the
's ruling in
Pila Pahan alias Peela Pahan & Ors. V/S State of Jharkhand & Anr.
[AIR 2026 SC 2966], the court observed that once a judgment is reserved, it should normally be pronounced within three months. If not, the matter must be brought to the Chief Justice's notice for assignment to another bench.
The judges admitted:
"Though the aforesaid judgment has come in the year 2026 (
) we have not been able to adhere to the aforesaid timelines set out by the Hon’ble
."
As a result, they released the case for rehearing before the regular bench handling indirect tax matters.
Behind the Tax Demand
The dispute stems from a issued by customs authorities alleging that Skoda Auto Volkswagen India imported vehicle components as individual parts to pay lower duties, when they should have been classified as Completely Knocked Down (CKD) kits attracting 30% to 60% customs duty. The investigation claimed the company used software to split orders across suppliers in different countries to avoid higher taxes. The demand covers imports made between March 2012 and July 2024, involving approximately 33,000 transactions.
Volkswagen, represented by , has consistently denied the allegations. The company argues that it legitimately imported individual parts and relied on a 2011 clarification from the Revenue Secretary. It also contends that the was issued after an inordinate delay, making it , and that the prolonged prevented it from recovering costs from customers.
Temporary Relief, Fresh Uncertainty
To facilitate the petitioner's approach to the regular bench, the court directed that be maintained for four weeks from the date of the order. This gives Volkswagen temporary breathing room, but the case now heads back to square one. Both sides will have to present their arguments anew before a different bench, prolonging a legal battle that has already spanned over a decade.
The outcome will be closely watched by the automotive industry, as it could set a precedent on how multinational automakers classify imported vehicle parts in India. For now, Skoda Auto Volkswagen India must prepare to reargue its position, while investors and analysts monitor the potential financial liability that remains unresolved.
Key Observations from the Court
In releasing the matter, the bench made clear its acknowledgment of the procedural lapse:
"Due to the we have not been able to till date. In these circumstances, we release the above matter, and which shall now be placed for hearing before the regular Bench as per the roaster hearing Writ Petitions arising from indirect taxes."
The court also ensured continuity by ordering , signalling that while the case must start over, the parties' positions remain protected during the transition.
The Road Ahead
With the matter now delinked from the earlier bench, the Chief Justice will assign it to a bench hearing indirect tax writs. The decade-old classification dispute—centered on whether the imported components qualified as CKD kits or individual parts—will be fought anew. For Volkswagen, the immediate priority is to secure a fresh hearing and ultimately resolve the tax ambiguity that has cast a long shadow over its Indian operations.
