A Brazilian court on Tuesday overturned a ruling made last week ordering Volkswagen to recall up to 400,000 one-liter cars over an unusual engine noise, a statement on the court's website said.

Volkswagen, Brazil's second biggest car brand, was ordered by a judge in Rio Grande do Sul last Friday to make the recall of the 2009/10 models fitted with the affected engines over concerns they could wear prematurely and generate extra costs for owners.

But a different judge in the same state ruled in VW's favor in an appeal on Tuesday, scrapping the recall and determining it could irreparably tarnish the manufacturer's image and that the cost could hurt the automobile sector as a whole.

Volkswagen said that in 2009 it detected the engine issue but determined it did not represent a risk to the health and safety of consumers.

The German company said that it agreed with authorities of several Brazilian states at the time to resolve the issue by offering free oil checks and changes for the affected cars. It also extended the guarantee on the engines.

For more details on the prior judgment and the alleged engine problem, see: [ID:nL2N0AH0L1]

(Reporting by Peter Murphy; Editing by Edwina Gibbs)