Adani Power had challenged the 2010 notification in the High Court, which held that ‘the levy of custom duty is illegal’
In a major relief to Adani Power, the Supreme Court on Friday set aside a 2010 notification of the Union government which levied customs duty to the tune of Rs 300 crore on the company for electricity transfer from its thermal power plant in Mudra Special Economic Zone to domestic areas with retrospective effect.
With a bench headed by chief justice HL Dattu upholding the Gujarat High Court’s order, Adani Power is entitled for exemption from payment of customs duty from June 26, 2009 to September 15.9.2010 on the electricity cleared to Domestic Tariff Areas (DTAs) from its 4620 MW-thermal plant in SEZ, a stand opposed by the Centre.
Challenging the HC judgment that quashed the impunged notification being ultra vires, the finance ministry stated that Section 30(A) of the SEZ Act 2005 provides that any goods removed from a SEZ to the DTA are chargeable to duties of customs, including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act 1975 as leviable on such goods when imported.
Besides, the customs duty is payable retrospectively from June 26, 2009 for electrical energy produced in SEZ and tranferred/removed to the DTA/non-processing areas, it said.
In 2010, the government had issued a notification seeking to impose 16% customs duty on power generated in SEZs as it viewed the power sold from SEZ as an import. While Adani has commissioned two units of 330 MW each at Mundra SEZ, a part of electricity is sold outside the SEZ to Gujarat Urja Vikas Nigam.
According to the government, Parliament is entitled to make any law providing for levy of customs duty and the legislative power of the Parliament is plenary unless the Constitution expressly prohibited it and no fetters can be placed on its power. Since the 2010 notification was amended restrospectively, it can levy customs duty on Adani.
Adani Power had challenged the 2010 notification in the High Court, which held that “the levy of custom duty is illegal as it amounts to levying customs duty on electrical energy, which can only be levied by a substantive provision of law.”
“Customs duty at the rate of 16% advalorem levied by notification dated February 27, 2010 could not be imposed retrospectively with effect from June 26, 2009 and, therefore, retrospective amendment is illegal and arbitrary and deserves to be set aside, the HC stated in its July 15 judgement.