Supreme Court Grants Customs Duty Exemption to Adani Power on SEZ Electricity 

The Supreme Court of India has allowed Adani Power Limited to claim exemption from customs duty on electricity supplied from a Special Economic Zone (SEZ) in Gujarat to the Domestic Tariff Area (DTA).

The case arose from a 2019 order of the Gujarat High Court, which had denied Adani Power relief from paying customs duty on electricity generated by its coal-based thermal power plant at Mundra Port. The High Court had earlier, in 2015, ruled that imposing customs duty on electricity retrospectively was illegal and arbitrary.

Adani Power generates and supplies electricity from its SEZ unit to areas outside the SEZ. In 2010, the government imposed customs duty on electricity with retrospective effect from June 2009. This levy was struck down by the Gujarat High Court in 2015, which held that customs duty on electricity could only be imposed prospectively through a proper law. The Court also noted that charging duty amounted to double taxation, as duty had already been paid on raw materials.

However, when customs authorities continued to impose duty for later periods based on new notifications, Adani Power again approached the Gujarat High Court. In 2019, the High Court refused relief, stating that the company had not separately challenged the later notifications. This led Adani Power to move the Supreme Court.

A Bench of Justice Aravind Kumar and Justice N.V. Anjaria examined whether the 2015 High Court ruling applied to later periods and whether the absence of a fresh challenge to subsequent notifications could deny relief.

Allowing the appeal, the Supreme Court held that the 2015 judgment had clearly declared that customs duty could not be levied on electricity supplied from an SEZ to the DTA without a valid charging provision under the Customs Act. This declaration, the Court said, was not limited to a specific period or notification.

The Court rejected the government’s argument that later notifications issued in 2010 and 2012 created a new levy. It clarified that these notifications only changed the rate of duty and did not cure the basic legal defect. Since there was no lawful authority to impose the duty, the levy remained invalid.

The Supreme Court also criticised the 2019 Gujarat High Court decision, stating that a coordinate bench was bound to follow the 2015 ruling or refer the matter to a larger bench. Narrowing the scope of the earlier judgment was held to be contrary to judicial discipline.

Holding that the levy was without authority of law, the Court ruled that the government could not retain the amount collected. It directed the concerned Customs Commissioner to verify the claims and refund the amount to Adani Power within eight weeks.