Back
SUPREME COURT OF INDIA
ARAVIND KUMAR, N.V. ANJARIA, JJ.
Adani Power Ltd. & Anr. – Appellants
Versus
Union of India & Ors. – Respondents
Civil Appeal No. 22 of 2026 (Arising out of Special Leave Petition (Civil) No. 24729 of 2019)
Decided On : 05-01-2026
The legal judgment clearly establishes that the imposition of customs duty on electricity generated within a Special Economic Zone (SEZ) and supplied to the Domestic Tariff Area (DTA) is not legally sustainable under the current statutory and constitutional framework (!) (!) . The Court's core reasoning is that there is no lawful charging event—such as "import into India"—to justify the levy of customs duty on domestic intra-national transactions of electricity, even when deemed as "imported" under fiction (!) (!) .
Furthermore, the Court emphasizes that the authority to impose customs duty is rooted in specific statutory provisions, notably Section 12 of the Customs Act, which applies to goods "imported into India," and Section 30 of the SEZ Act, which treats SEZ-to-DTA transfers as if they were imports for duty purposes, but does not create a new or independent levy (!) (!) (!) (!) . The Court finds that the use of notifications labeled as "exemptions" to impose or quantify duties—particularly when such notifications have retrospective effect—is a misapplication of delegated legislative powers, constituting a colourable exercise of authority and thus ultra vires (!) (!) .
The Court also reaffirmed that the legal declaration made in a prior judgment, which held that no customs duty could be lawfully imposed on such intra-national electricity transfers, was a binding and comprehensive pronouncement of law, not confined to a particular notification or period. This declaration extended to all transactions on the same legal footing unless there was a material change in the law or facts, neither of which was demonstrated in this case (!) (!) (!) .
Importantly, the Court underscored the principle that once a levy is declared unconstitutional or ultra vires, subsequent notifications that continue to enforce the same levy, even if altered in form or rate, are invalid. The Court rejected the argument that each notification must be separately challenged; it held that the illegality at the root invalidates all derivative measures that seek to enforce the same unlawful levy (!) (!) (!) .
The Court also highlighted the importance of respecting judicial discipline and the doctrine of precedent, emphasizing that a co-ordinate Bench must adhere to the binding effect of earlier authoritative judgments. Any attempt to narrow or sideline a final, binding declaration without proper reference to a larger Bench undermines the rule of law and judicial integrity (!) (!) (!) .
Finally, the Court directed that the authorities must refund the amounts collected under protest during the relevant period, affirming the obligation of the executive to give full effect to judicial pronouncements once they attain finality (!) (!) (!) . The decision underscores that the absence of a statutory charging provision, combined with the misuse of exemption powers and the violation of constitutional principles, renders the contested levies unlawful, and mandates restitution of the illegally collected amounts.
| Table of Content |
|---|
| 1. appeal against gujarat high court judgment (Para 1 , 2) |
| 2. foundational questions of law at stake (Para 3 , 4) |
| 3. high court's ruling on customs duty (Para 5 , 13 , 15) |
| 4. infrastructure and details on sez regulations (Para 6 , 8 , 10 , 14) |
| 5. historical overview of customs duty policy (Para 7 , 9 , 11 , 12) |
| 6. impact of high court decisions on case trajectory (Para 18 , 19 , 20 , 21) |
| 7. appellant's arguments regarding unfair taxation (Para 26 , 27 , 28 , 29 , 30) |
| 8. union's defense of earlier judgments (Para 33 , 34) |
| 9. conclusive orders and directives from the supreme court (Para 86 , 89 , 90 , 91) |
JUDGMENT :
ARAVIND KUMAR, J.
1. Leave granted.
2. This appeal is directed against the judgment and order dated 28 June 2019 passed by the High Court of Gujarat in Special Civil Application No. 2233 of 2016. By the impugned judgment, the High Court declined to grant the reliefs sought by the appellant, Adani Power Limited, which had inter alia prayed for a declaration that no customs duty was leviable on electrical energy generated in its power plant located in a Special Economic Zone (SEZ) and supplied to the Domestic Tariff Area (DTA), and for consequential refund of amounts deposited towards such duty. The High Court took the view that its earlier judgment delivered in 2015 in favour of the appellant was confined to a particular notification and period, and could not be extended to the later period or to subsequent notifications issued by the Union. Aggrieved, the appellant has approached this Court.
3. The controversy is not merely fiscal. It raises, in our view, questions that bear upon three foundational aspects of our legal order: first, the limits of delegated legislation in matters of taxation; secondly, the discipline of judicial precedent and the obligation of co-ordinate Benches to adhere to settled law; and thirdly, the obligation of the State to give effect to judicial declarations instead of reasserting, in altered form, a levy already declared to be without authority of law.
4. We have heard Mr. Chidambaram, learned senior counsel appearing on behalf of the appellant and the learned Raghav Shankar Additional Solicitor General appearing on behalf of the Respondents and before proceeding to consider their arguments it would be of relevance to note the factual background and it reads:
I. FACTUAL BACKGROUND
5. The appellant operates a coal-based thermal power plant of about 5,200 MW capacity within the Mundra Special Economic Zone (SEZ) in the State of Gujarat. The appellant is a co-developer in that notified SEZ. The electricity generated at this plant is partly consumed within the SEZ and substantially supplied to buyers in the DTA, including State utilities.
6. Under the architecture of the Special Economic Zones Act, 2005 (“the SEZ Act”), an SEZ is afforded a special fiscal treatment to encourage manufacturing and infrastructure creation. Section 30 of the SEZ Act provides that any goods removed from an SEZ into the DTA shall be chargeable to duties of customs “as if such goods had been imported into India”. The intent is to maintain parity between goods physically imported into India from abroad and goods cleared from an SEZ into the domestic economy.
7. Prior to 2009, electrical energy per se did not attract customs duty on import. The relevant tariff entry treated imported electricity at a nil rate. In consequence, though Section 30 of the SEZ Act deems removals from the SEZ into the DTA to be subject to customs duty “as if imported”, electrical energy moving from an SEZ to the DTA bore, in practical terms, no customs duty. The fiscal neutrality in relation to electricity was maintained in a different way.
8. Rule 47(3) of the SEZ Rules, 2006 recognises that power generated in an SEZ may also be supplied to the DTA. To prevent misuse of duty-free inputs, Rule 47(3) provides that where electricity produced using duty-free inputs in the SEZ is cleared to the DTA, the SEZ unit would have to make good the customs
Customs duty cannot be lawfully imposed on electricity generated in Special Economic Zones and supplied to Domestic Tariff Areas due to lack of a proper charging provision, reaffirming the authority ....
SEZ Act Section 26 exemption for services to SEZ units overrides service tax levy under Finance Act; procedural non-compliance in notifications does not defeat substantive statutory exemption due to ....
Amendments to taxation statutes cannot change their fundamental basis without corresponding amendments to the charging provisions, which must be clear and unambiguous to avoid excessive delegation of....
It is over enthusiasm of the officer to advance the departmental cause that without grasping the ratio on the subject and disregard to the settled principles of law that he has initiated the action a....
The court declared Section 25(4) of the Customs Act unconstitutional, asserting that notification increases in duty require proper publication to inform the public adequately.
The court upheld the increased electricity duty as legal, distinguishing between tariff and duty, affirming legislative competence for revenue augmentation while rejecting claims of discrimination un....
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
