Supreme Court Declares Customs Duty on SEZ to DTA Electricity Transfers Unconstitutional Apex Court orders refund for Adani Power Ltd., emphasizing limits of delegated legislation and adherence to judicial precedent.
In a landmark judgment, the Supreme Court of India has declared the imposition of customs duty on electrical energy transferred from Special Economic Zones (SEZ) to the Domestic Tariff Area (DTA) as unconstitutional. The decision comes as a significant victory for Adani Power Ltd., which had challenged the levy, resulting in a directive for the refund of amounts deposited under protest.
The case, adjudicated by a bench comprising Justices Aravind Kumar and N.V. Anjaria, revolved around the legality of customs duty imposed via successive notifications, starting with Notification No. 25/2010-Cus., which retrospectively levied a 16% duty on electricity from SEZ to DTA. The Court reaffirmed that such a levy was ultra vires due to the absence of a lawful charging event under Section 12 of the Customs Act, misuse of exemption powers under Section 25 of the same Act, and violation of the parity principle under Section 30 of the SEZ Act.
The judgment emphasized that the Gujarat High Court's 2015 decision, which had already struck down the levy for a specific period, extended as a matter of principle beyond the notification and timeframe initially contested. The Supreme Court criticized the 2019 Gujarat High Court decision for failing to adhere to the established precedent and for requiring a fresh challenge against later notifications despite their reliance on the same invalidated basis.
The Supreme Court underscored the importance of judicial discipline, stating that a coordinate bench must follow prior decisions or refer contentious matters to a larger bench, rather than narrowing the scope of previous rulings. It also highlighted the obligation of the executive to conform to judicial pronouncements, warning against attempts to reintroduce invalidated levies through altered subordinate legislation.
The Court directed the Union of India and customs authorities to refund the amounts collected from Adani Power Ltd. for the period between September 2010 and February 2016, without interest, and mandated the completion of this process within eight weeks. The ruling ensures that no further demands for customs duty on SEZ to DTA electricity transfers for the concerned period will be made against the appellant.
Bottom Line:
Customs Duty - Levy of customs duty on electrical energy cleared from Special Economic Zone (SEZ) to Domestic Tariff Area (DTA) is ultra vires - Absence of lawful charging event under Section 12 of Customs Act, misuse of exemption power under Section 25 of Customs Act, and violation of parity principle under Section 30 of SEZ Act - Refund of amounts deposited under protest directed.
Statutory provision(s): Customs Act, 1962 Sections 12, 25; Special Economic Zones Act, 2005 Section 30; Constitutional Law Articles 14, 265.
Adani Power Ltd. v. Union of India, (SC) : Law Finder Doc Id # 2833295
