SC notice to finance ministry, others on Adani plea seeking duty parity.

Source – financialexpress.com

The Supreme Court on Monday sought response from the finance ministry, Central Board of Excise and Customs and others on Adani Power’s (Mundra) appeal seeking an exemption from customs duty levied on electricity generated and supplied from its 5,200 MW Mundra Special Economic Zone power plant to Domestic Tariff Area (DTA).

A Bench led by justice DY Chandrachud issued notice to the finance ministry, CBEC, Specified Officer Incharge of Mundra SEZ and others after Adani challenged the Gujarat High Court’s order that dismissed its refund petition on June 28 by ruling that its earlier 2015 judgment was limited to quashing of a particular notification and any relief with respect to the later notifications was not covered by that order.

Adani had moved the HC challenging various notifications relating to the levy of customs duty on electricity removed from SEZ to DTA on the ground that once the levy of the customs has been set aside in principal by the HC itself and thereafter, confirmed by the SC in 2016, there was no occasion for the customs department to levy the same through “backdoor”.

Adani, which sells electricity from its 5,200 MW Mundra SEZ power plant to Gujarat Urja Vikas Nigam, had sought refund of customs duty which, according to the company, was wrongly levied.

Senior counsel Arvind Datar and counsel Anshuman Srivastava, appearing for Adani, argued that the rate of customs duty on electricity imported in India is nil (from Nepal and Bhutan) and, therefore, no customs duty could be levied on electricity removed by it from SEZ to DTA.

The HC could not have denied relief by failing to apply its own ratio when it had on July 15, 2015, quashed the proviso to the notifications, as amended by clause 60 of the Finance Bill, 2010, that had sought to levy a 16% ad valorem duty on the electricity removed from the SEZ to DTA holding the same as ultra vires entry 83 of List I of Schedule VII to the Constitution, Section 12 of the Customs Act, 1962, and Section 30 of the SEZ Act as well as Articles 14 and 265 of the Constitution, the counsel argued.

Adani told the apex court that the HC had erroneously failed to follow its earlier 2015 judgment (later affirmed by the apex court in 2016) that ruled that as a principle of parity, no custom duty can be levied on electricity generated in a SEZ when removed to DTA, since it was akin to a custom duty on electricity imported into India in view of Section 30 of the SEZ Act, 2005. The HC had held that “since the goods are being brought from SEZ to DTA, then it has to be treated as imported goods which has come from outside”, thus exempted from customs duty.

The HC had stated that by virtue of Section 30 of the SEZ Act, 2005, the duty charged on the clearance of goods from an SEZ unit to a DTA shall be the same as the duty of customs that is leviable on such goods when they are imported into India, the company said, adding that there has been no change in law till now and the relevant provision of the SEZ Act has remained unamended.

Therefore, since the electricity imported from foreign countries continued to be fully exempted under entry 573 of the parent notification, Adani within the SEZ cannot be charged any duty when removing the final product (electricity) from the SEZ to DTA, the counsel contended. It is submitted that even otherwise, no customs duty could be levied under the aegis of the Customs Act or the SEZ Act as the very concept of customs duty is that it is levied on goods which are imported into the territory of India from outside India.