Mumbai, Feb. 12 -- At the heart of a $1.4 billion tax dispute between Volkswagen Group and the Indian government lies a piece of enterprise software, which the German group uses to source car parts from the across the world.

The carmaker said in a court petition that according to the government, instead of importing completely knocked down (CKD) kits paying 35% duty, Skoda Auto Volkswagen India Pvt. Ltd (SAVWIPL) used its software NADIN to break down vehicle orders to components and sub-assemblies. These were then imported at a lower duty of 5-15%, and assembled locally to finished vehicles. Mint has seen a copy of the petition filed in the Bombay High Court.

CKD implies importing all components of a car in an unassembled state, which c...