The Supreme Court of India has ruled that electricity supplied from Special Economic Zones (SEZs) to Domestic Tariff Areas (DTAs) cannot be subjected to customs duty, providing significant relief to a major power producer in Gujarat. The decision, which overturns a 2019 Gujarat High Court judgment, is expected to have financial and regulatory implications for energy producers operating within SEZs and could influence policy clarity for industrial infrastructure in India.
The case centres on a coal-based thermal power plant in the Mundra SEZ, which has an installed capacity of 4,620 MW. The plant supplies electricity to state distribution companies under long-term agreements while also meeting local SEZ demand. Officials note that the ruling removes ambiguity over statutory authority, confirming that levies imposed beyond previously recognised exemption periods lacked legal basis. Authorities have been directed to verify claims and process refunds within two months, providing both fiscal relief and precedent for similar SEZ-based industrial projects. Urban planners and industry analysts highlight that the verdict strengthens the operational certainty of large-scale energy infrastructure in SEZs. By clarifying tax obligations, the decision could encourage further private sector investment in energy generation and associated industrial development, particularly in regions designed for export-oriented manufacturing. “The ruling reinforces confidence for developers that regulatory interpretations cannot retroactively impose undue financial burdens,” said a senior policy analyst.
The legal dispute has a decade-long history. Initial amendments to customs rules in 2010 sought to levy duty on electricity supplied from SEZs to DTAs, with retrospective effect. Earlier High Court rulings provided limited exemptions, but subsequent interpretations by SEZ authorities attempted to enforce duties beyond the recognised period, prompting repeated litigation. The Supreme Court’s decision addresses the fundamental question of statutory authority, asserting that once a levy is declared unlawful, continuation through successive notifications is invalid, irrespective of form or sequence. Energy economists suggest that the ruling could also influence electricity pricing frameworks and the financial modelling of SEZ projects, particularly in states with high renewable and thermal power capacity. By reducing unanticipated compliance costs, industrial SEZ operators may redirect capital towards infrastructure upgrades, emission reduction measures, and climate-resilient technologies, aligning with broader urban and sustainability objectives.
Legal experts note that the decision underscores the judiciary’s remedial role in enforcing statutory limits and preventing arbitrary enforcement. The clarity provided is expected to guide both regulators and energy developers, supporting equitable and predictable industrial growth while mitigating regulatory risk in critical sectors such as power and infrastructure.
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