SC asks Skoda to deposit Rs 30 cr with Customs Dept

The Supreme Court has upheld tax appellate tribunal CESTAT's direction to Skoda India to submit deposit of Rs 30 crore dispute over in Rs 194 crore duty by the Customs Department.

The Customs Department had demanded Rs 194 crore as duty on Skoda Auto India for $45 million royalty paid to its parent company which is a subsidiary of Volkswagen Group.

A bench comprising justices D K Jain and H L Dattu on Monday dismissed the petition filed by Skoda India asking the auto maker to pay as per the directions of the Customs Excise and Service Tax Appellate Tribunal.

Earlier, the Bombay High court had also rejected Skoda's petition.

"We do not find any ground to interfere with the impugned order passed by the High Court. Accordingly, the special leave petition is dismissed," said the Supreme Court.

However, providing some relief to the company, which is 100 per cent owned by the Czech major, the apex court extended the time by four weeks for depositing the money with the authorities.

"We extend the time granted by the high court for deposit of Rs 30 crores by a further period of four weeks from today," the bench said.

According to the Custom Department, $45 million was paid by Skoda India in the name of technology tranfer agreement, was in fact part of the value of 45,000 car kits supplied by parent firm to Skoda India from time and time.

Skoda India, which has set up its plant in Auranagabad, manufactures cars by importing kits from its parent firm.

On the basis of the material found during a search operation and the statements made by various persons, the department had issued showcause notices Skoda India asking it why why $45 million paid by it should not be considered as part of the value of the raw materials imported from Skoda.

The department laster slapped a duty of Rs 97.15 crore and imposed a penalty of equivalent amount under Section 114A of the Customs Act, 1962.

The tax department had also levied penalty against the ex Managing Directors as well as the chartered accountants of Skoda India.

This was challenged by Skoda India before the CESTAT, which on May 12, 2010 directed it to make predeposit of Rs 30 crore.