SC allows Adani Power’s appeal, sets aside Gujarat HC order over levy of customs duty

The Supreme Court on Monday set aside the 2019 order of the Gujarat High Court refusing to grant relief to Adani Power Limited on account of customs duty imposed on electric power generated at the power plant located in the SEZ and supplied to the domestic tariff area (DTA).

A bench comprising Justices Aravind Kumar and NV Anjaria stated that the high court in July 2015 had removed customs duty on electrical power transferred by the firm from its SEZ unit to DTA from June 26, 2009 to September 15, 2010.

The apex court reportedly refused to intervene in the high court’s 2015 order in November 2015.

“Accordingly, we are of the opinion that after the 2015 decision declared the tax ultra vires and this court refused to intervene, it was the duty of the administrative authorities to bring their conduct into line with this declaration,” the panel said.

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It was also stated that “Judicial statements are not advisory opinions; they are binding legal orders.”

The bench said that if the executive continues to impose a judicially abolished tax under a new guise, it violates constitutional discipline and undermines public confidence in the rule of law.

“Final judgment is an essential component of good governance. Repetition of invalidated tax through successive notifications results in unnecessary litigation, burdens the courts, and exposes citizens to long-term uncertainty.”

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The high court said authorities should deal with the matter as it was concluded and extend the benefits of the 2015 decision in the same manner to all subsequent periods until the law is amended by a legal action.

The apex court gave its order after Adani Power Ltd and others challenged the high court’s order dated June 28, 2019.

He said the 2019 division bench of the high court, as a coordinating bench, should either follow the 2015 judgment or refer the question to a larger bench if it doubted the correctness or applicability of that judgment.

“We submit that the customs duty on electrical energy transferred by the appellant (Adani Power Ltd) from the SEZ unit to the DTA during the relevant period has no statutory authority,” the bench said. he said.

He said that the central and competent customs authorities, after due verification, will refund to the company the amount deposited in cash or by converting the deposit into cash or under protest by the company against customs duty on receipt of electrical power from the SEZ unit to DTA between September 16, 2010 and February 15, 2016.

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Allowing the appeal, the panel said that the high court’s decision in June 2019 could not be sustained.

“It is further directed that no further claim shall be entertained against the appellant in respect of customs duty on electrical energy transferred from the SEZ unit to the DTA during the period covered by this appeal as the said duty is found to be unsustainable.”

The panel also said: “For the avoidance of doubt, we clarify that we do not express any opinion on any legislative regime that Parliament may enact in the future. Our findings are limited to the period set out above and the legal framework arising in the current appeal.”

It was stated that the appellant operates a coal-based thermal power plant with a capacity of approximately 5,200 MW within the Mundra Special Economic Zone (SEZ) in Gujarat.