Supreme Court Allows Customs Duty Exemption To Adani Power For Electricity Taken From Gujarat SEZ

The Supreme Court today(January 5) allowed an appeal preferred by Adani Power Limited against the Gujarat High Court's 2019 order, which refused to exempt the company from payment of the customs duty on electrical energy removed from the Special Economic Zone(SEZ) to the Domestic Tariff Area (DTA) by its coal-based thermal power plant situated in Mundra Port.The petitioner(Adani Power) is engaged in the activity of generating, transmitting and selling electrical energy from the SEZ to the DTA. In 2010, the Government levied custody duty with retrospective effect from 26.6.2009, which the Gujarat High Court in 2015 held to be arbitrary and illegal. It held that the petitioner was exempted from the levy of customs duty for the period 26.6.2009 to 15.9. 2019 as the levy of customs duty on electrical energy can only be levied prospectively through a substantive law. The High Court also stated that it amounted to double taxation as the petitioners had paid duty on raw materials. Adani again went to the Gujarat High Court after the authorities imposed custody duty for a period onwards. In 2019, the High Court denied the relief, stating that they had not challenged the subsequent notification imposing the duty, against which they came before the Supreme Court.A bench comprising Justice Aravind Kumar and Justice NV Anjaria considered the following questions:1. Firstly, what, if not, the Gujarat High Court decided in its judgment dated 15 July 2015, and what is the true scope of the decision?2. Secondly, whether the period subsequent to 15 September 2010 and prior to 16 November 2016, there was any material changes in the statutory position or factual footing that would justify a different result from that arrived in 2015 judgment. 3. Thirdly, whether the High Court in its impugned judgment of 28 June 2019 was justified in holding that no relief could be granted to the applicant in the absence of a specific and fresh challenge to the notification numbers 91 of 2010 and 26 of 2012.4. Fourthly, in view of 2015 declaration of law and its affirmation of the High Court in 2019, was at liberty being a coordinate bench to deny relief by narrowing the effect of the earlier pronouncement.Findings Of The CourtAllowing the appeal, the Court held that the 2015 Gujarat High Court judgment had conclusively declared, as a matter of law, that customs duty could not be levied on electrical energy cleared from SEZ to DTA in the absence of a valid charging provision under Section 12 of the Customs Act.The Bench ruled that this declaration was not confined to the specific notification or period considered in 2015 but went to the very authority of the State to impose such a levy under the statutory framework then prevailing, including the SEZ Act and constitutional constraints under Articles 14 and 265.Rejecting the State's contention, the Court observed that subsequent notifications issued in 2010 and 2012 merely altered the rate of duty and did not create a fresh levy or a new legal footing. The absence of a lawful charging event continued to persist.“The argument that no relief could be granted in the absence of a fresh and specific challenge to each later notification is untenable,” the Court held, noting that Adani Power's later writ petition was a sequel seeking enforcement of the earlier declaration of law and refund of amounts paid under protest.Coordinate Bench Bound By Earlier RulingThe Supreme Court further held that the 2019 Division Bench of the High Court, being a coordinate Bench, was bound to follow the 2015 judgment or refer the matter to a larger Bench if it doubted its correctness. It could not circumvent judicial discipline by artificially narrowing the scope of the earlier ruling.“There was no material change in law or fact between September 2010 and February 2016 that justified a departure from the 2015 ruling,” the Bench observed.Holding that the levy itself was without authority of law, the Court ruled that the State could not retain amounts collected under such levy. Restitution, it said, was a necessary consequence of the finding of illegality.Accordingly, the Supreme Court set aside the Gujarat High Court's 2019 judgment and directed the jurisdictional Commissioner of Customs to complete the verification and refund exercise within eight weeks.Summarising the pronouncement, the Court said: "The Gujarat High Court judgment dated 15 July 2015, as a matter of law, declared that customs duty could not be limited on electrical energy cleared from the applicant's SEZ unit to DTA, i.e., domestic traffic area. Having regard to the absence of a lawful charging event under Section 12 of the Customs Act, the limited scope of Section 25 of that Act, the parity requirement of Section 30 of the SEZ Act, and the constitutional constraints of Article 14 and Article 265, is squarely applicable to the judgment and order dated 28.06. 2019. That declaration was not confined in principle to notification of 25 of 2010 or to the...

Supreme Court Allows Customs Duty Exemption To Adani Power For Electricity Taken From Gujarat SEZ

Gursimran Kaur Bakshi

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