**Supreme Court Rules in Favor of Adani Power on Customs Duty**
In a landmark decision, the Supreme Court of India has provided significant relief to Adani Power Ltd by ruling that customs duty cannot be imposed on electricity supplied from a Special Economic Zone (SEZ) to the domestic market. This ruling, delivered on Monday, overturns a 2019 judgment by the Gujarat High Court and exempts the company from customs duty on power generated at its Mundra plant.
The bench, comprising Justices Aravind Kumar and NV Anjaria, determined that the imposition of customs duty lacked legal authority, stating that the government cannot retain funds collected under an invalid tax. The court has instructed customs authorities to refund the duty collected from Adani Power, mandating that the jurisdictional Commissioner of Customs complete verification and issue refunds within eight weeks of the judgment.
This ruling addresses a protracted tax dispute that dates back to 2010. The Gujarat High Court had previously noted that customs duty collections amounted to approximately ₹458 crore, excluding interest. The detailed judgment was not available at the time of this report, and attempts to reach the Adani Group for comment went unanswered.
Adani Power operates a coal-based thermal power plant within the Mundra SEZ in Gujarat’s Kutch district, near Mundra Port. The plant has an installed capacity of 4,620 MW and supplies electricity under long-term power purchase agreements to distribution companies in Gujarat and Haryana, as well as to the utility serving the Mundra SEZ.
The origins of the dispute trace back to February 2010, when the central government amended customs rules to impose a duty on electricity supplied from an SEZ to the Domestic Tariff Area (DTA), with authorities attempting to apply the levy retroactively from June 2009. At that time, electricity imported into India from foreign countries was still exempt from customs duty.
Adani Power contested the levy in the Gujarat High Court, which in July 2015 invalidated parts of the duty framework and granted the company an exemption for SEZ-to-DTA electricity supplies, but only for a limited period from June 2009 to September 2010. The Supreme Court later chose not to intervene in that ruling.
Following the 2015 judgment, SEZ authorities interpreted the exemption as strictly time-bound, asserting that customs duty remained applicable on electricity supplied after September 2010. Customs authorities continued to issue demands based on subsequent notifications from 2010 and 2012, which reduced the duty rate from 10 paise per unit to 3 paise per unit.
Adani Power ceased payment of the duty and sought refunds, arguing that the levy had been deemed illegal, and thus subsequent notifications could not reinstate it. Authorities contended that the relief granted in 2015 was limited to a specific timeframe, necessitating new challenges for subsequent notifications.
This ruling marks a pivotal moment in the ongoing legal battle and could have significant implications for the energy sector and SEZ regulations in India.
**FAQ**
**Q: What was the Supreme Court’s ruling regarding Adani Power’s customs duty?**
A: The Supreme Court ruled that customs duty cannot be levied on electricity supplied from a Special Economic Zone to the domestic market, providing relief to Adani Power and ordering a refund of previously collected duties.
