Adani Power Ltd. & Anr Vs Union of India & Ors. (Supreme Court of India)
Customs Duty on SEZ-to-DTA Electricity Is Ultra Vires: Delegated Legislation Cannot Create a Tax or Defy Binding Precedent
The Supreme Court held that customs duty cannot be levied on electrical energy generated in a Special Economic Zone (SEZ) and supplied to the Domestic Tariff Area (DTA) in the absence of a lawful charging provision. The Court affirmed that Section 12 of the Customs Act, 1962 authorises levy only on goods “imported into India”, and electricity generated within India in an SEZ and wheeled into the DTA does not constitute an import. The deeming fiction under Section 30 of the SEZ Act merely ensures parity of duty treatment with actual imports and does not expand the charging section or create a new taxable event.
The Court strongly condemned the Union’s attempt to use exemption notifications under Section 25 of the Customs Act to impose customs duty, holding that the power to exempt is a power to relax a levy, not to invent one. Notifications prescribing 16% ad valorem duty and later specific duties of ₹0.10 and ₹0.03 per unit were held to be a colourable exercise of delegated legislation, violating Article 265 and resulting in arbitrary double taxation, since duty benefits on inputs were already neutralised under Rule 47(3) of the SEZ Rules.
Crucially, the Court ruled that the 2015 Gujarat High Court judgment striking down the levy was a binding declaration of law, not confined to a particular notification or period. In the absence of any material change in law or facts, a coordinate Bench could not narrow or bypass that ruling, and was bound either to follow it or refer the matter to a larger Bench. The State was further held obliged to implement the judgment in substance, and could not resurrect the same invalid levy through successive notifications at altered rates.
Accordingly, the Supreme Court set aside the 2019 High Court judgment, declared the levy for the period 16 September 2010 to 15 February 2016 to be without authority of law, directed refund of all amounts collected under protest (without interest), and restrained any further recovery for the relevant period, reinforcing the principles of rule of law, finality of litigation, and limits on delegated taxing power
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
