The filmmaker, whose controversial movie with American porn star Mia Malkova was released on internet last month, was quizzed for nearly three-and-half hours by the officials of the Central Crime Station (CCS).
The police officials questioned him about the allegations made against him by women activists.
The officials seized Varma's laptop and served another notice under Section 41 of Criminal Procedure Code, asking him to appear before them once again next week.
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The filmmaker told police that he did not direct or produce the movie and it was only the concept which he had given. He claimed that the movie was shot in Poland and the United Kingdom.
With regard to some objectionable pictures in which he is seen with the actress, he told police that the pictures were taken when she was shooting for another movie.
CCS Additional DCP Raghuveer told reporters that they collected his passport details.
Varma sought time to answer some questions from the investigating officers.
On January 25, a day before the release of the movie, Varma was booked by the CCS. A case under Section 67 of the Information Technology Act, 2000 was booked against him for publishing or transmitting obscene material in electronic form.
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The filmmaker was also booked under sections 506 and 509 of the Indian Penal Code for allegedly making personal comments against women activists during the debate on the movie on some television channels. When activists accused him of promoting obscenity, Varma allegedly offered to make similar movies with them. He has been charged with insulting the modesty of a woman.
The CCS this week issued fresh notice on Varma as he could not appear before the officials earlier.
Women's organisations in Telangana and Andhra Pradesh had staged protest last month, demanding ban on the release of the movie on web and Varma's immediate arrest.
The activists alleged that Varma released the movie on web to avoid the certification by authorities. They said the filmmaker was portraying woman as a sex object and promoting pornography.