The Supreme Court has allowed Adani Power’s appeal, setting aside the Gujarat High Court’s 2019 order on customs duty for electricity supplied from its Mundra SEZ to the Domestic Tariff Area. Detailed reasons are awaited.
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NEW DELHI: The Supreme Court has reopened a long-running dispute over the levy of customs duty on electricity supplied from Special Economic Zones (SEZs) to the Domestic Tariff Area (DTA), setting aside a 2019 Gujarat High Court ruling that went against Adani Power.
The judgment, delivered by a Bench of Justice Aravind Kumar and Justice N.V. Anjaria, overturns the High Court’s refusal to consider Adani Power’s challenge to customs duties imposed on electricity generated at its Mundra SEZ power plant after 2010. A detailed order from the Court is awaited.
Background of the Dispute
Adani Power operates a large coal-based thermal power station within the Mundra SEZ, supplying electricity both to units inside the SEZ and to state distribution companies outside it. The controversy stems from amendments to customs regulations that treated electricity cleared from an SEZ to the DTA as an “import” into India, thereby attracting customs duty.
This classification proved contentious, particularly because electricity imported from foreign jurisdictions attracted no equivalent duty, raising concerns of discrimination and inconsistency in tax treatment.
The 2015 Gujarat High Court Judgment
In 2015, the Gujarat High Court partially accepted Adani Power’s challenge and struck down aspects of the levy framework. However, the relief was restricted to a narrow window, from June 2009 to September 2010. That decision became final after the Supreme Court declined to interfere.
Following this, SEZ authorities maintained that Adani Power remained liable to pay customs duty on all electricity supplied to the DTA after September 2010. Adani disputed this interpretation and returned to the High Court, arguing that the levy itself was unlawful beyond the earlier period as well.
The Gujarat High Court Rejected Adani’s Claim in 2019
In its June 2019 ruling, the Gujarat High Court refused to reopen the issue. The Court reasoned that:
- The 2015 judgment had deliberately confined relief to a specific timeframe
- Adani could not seek a wider exemption through a later declaratory petition
- Granting further relief could result in undue fiscal advantage, since the company already enjoys duty-free procurement of inputs
- Subsequent customs regimes had not been independently challenged
- Exemptions applicable to foreign electricity imports could not be extended to domestic SEZ producers
This decision effectively closed the door on Adani’s broader challenge, until now.
Supreme Court’s Ruling
Setting aside the 2019 Gujarat High Court ruling, the Supreme Court reopened the issue of whether:
- The 2015 judgment was correctly interpreted as having a strictly limited application
- Adani Power’s broader challenge to the post-2010 customs duty levy on SEZ power supplies should have been adjudicated on the merits.
Appearance:
Adani Power: Senior Advocate P Chidambaram along with Advocates Mahesh Agarwal, Anshuman Srivastava, Rohan Talwar, Naman Agarwal and EC Agrawala.
The Union of India: Additional Solicitor General Raghvendra P Shankar, along with Advocates Gurmeet Singh Makker, Sharath Nambiar, Diwakar Sharma, Satvika Thakur, B Sunita Rao and Ishaan Sharma.
Case Title:
Adani Power v. Union of India
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