BMW India faces Rs 650-cr Customs blow

The company has been claiming its imports were under the 'completely knocked down' format, which attracts only 10% duty

The Customs department is investigating whether German luxury automaker BMW India has misrepresented its customs duty obligations on automobile parts imports since March 2011.

BMW India said “an inspection is in process by the authorities at the BMW plant in Chennai. We are co-operating with the authorities in the inspection process”.

According to Customs department sources, BMW has been importing the engine, gearbox and transmissions in pre-assembled format and assembles the cars at its facility on the outskirts of Chennai. Called a pre-assembled process, it attracts 30 per cent customs duty. However, the company has been claiming its imports were under the ‘completely knocked down’ format, which attracts only 10 per cent duty.

The Customs department is likely to slap a Rs 650-crore  notice on the car-maker, said a PTI report, quoting a finance ministry official.

BMW India officially opened its production plant in Chennai in March 2007. The existing facility at a 40-acre land in Mahindra World City, 50 km from Chennai, has a capacity to manufacture 11,000 units a year, if run on two shifts. The plant produces the BMW 3 Series, the BMW 5 Series, the BMW X1 and the BMW X3. Recently, the company announced its plan to produce its mini sports utility vehicle - MINI Countryman - at its Chennai facility, the first plant outside Europe to manufacture the product.

Since 2007, the German car maker has invested around euro 60 million in India.