No consignment from Skoda Auto Volkswagen India has been or will be stopped following a tax demand notice of $1.4 billion served on the company for allegedly providing misleading information regarding its imports, the Customs department informed the Bombay high court on Monday.

A division bench comprising Justices B P Colabawalla and Firdosh Pooniwalla was hearing a petition filed by the company last month, in which it challenged the notice, terming it as "arbitrary and illegal".

The court heard the matter extensively and said it would continue the hearing on Feb 20.

The German company said the demand of over INR 12,000 crore was "exorbitant".

The Customs has claimed that the company misclassified its imports of Audi, Skoda and Volkswagen cars as "individual parts" instead of "Completely Knocked Down" (CKD) units, thereby paying significantly lower customs duties.

The CKD units attract a 30-35% customs duty, but Volkswagen declared its imports as separate components in different shipments and paid only 5-15% in duties.

During Monday's hearing the bench posed tough questions to the company, suggesting that it could import all components of a car except for one item and still classify them as individual parts and not a CKD unit.

"You (petitioner) bring in all the components except for one. Let's say the gear box. You would still fall under the parts component and submit import duty at a lower rate. That is just clever tax planning," Justice Colabawalla said.

"Even if you (petitioner company) import all parts in one assignment except the gearbox and engine your argument of individual parts would stand, won't it. Still you won't come under the CKD unit component," he added.