Supreme Court Holds That Customs Duty Cannot Be Levied on Electricity Supplied from SEZ to DTA in Absence of a Statutory Charging Provision and Executive Cannot Reintroduce an Invalid Levy Through Successive Notifications

Held: The Supreme Court held that customs duty cannot be levied on electrical energy generated within a Special Economic Zone and supplied to the Domestic Tariff Area in the absence of a statutory charging event under Section 12 of the Customs Act, 1962, and that the Central Government cannot use exemption notifications under Section 25 to indirectly impose or continue such a levy, whether retrospectively or prospectively, once it has been judicially declared to be without authority of law.

Summary: The dispute arose from the levy of customs duty on electricity generated by Adani Power Ltd. at its power plant located in the Mundra SEZ and supplied to buyers in the Domestic Tariff Area. While imported electricity attracted nil customs duty, the Union of India sought to impose duty on SEZ-to-DTA electricity through Notification No. 25/2010-Cus. at 16% ad valorem with retrospective effect, later replacing it with per-unit duties under subsequent notifications. In 2015, the Gujarat High Court struck down the levy as ultra vires, holding that there was no taxable import, that Section 25 could not be used to impose a tax, and that the levy violated Articles 14 and 265 of the Constitution. Despite this, the authorities continued to collect duty for subsequent periods, leading to fresh litigation. The Supreme Court examined the statutory scheme of the Customs Act and SEZ Act, the doctrine of parity under Section 30 of the SEZ Act, limits on delegated legislation, and principles of judicial discipline, and held that the 2015 declaration of law was of general application and binding on subsequent periods in the absence of any change in law or facts.

Decision: The appeal was allowed, the judgment of the Gujarat High Court dated 28.06.2019 was set aside, the levy of customs duty on electricity supplied from the SEZ to the DTA for the period 16.09.2010 to 15.02.2016 was declared without authority of law, and the respondents were directed to refund the amounts collected under protest within eight weeks without interest, with a further direction restraining enforcement of any such demand for the relevant period and all pending applications disposed of.