2026 INSC 1 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO OF 2026

(Arising out of Special Leave Petition (Civil) No.24729/2019)

ADANI POWER LTD. & ANR …APPELLANT(S)

VERSUS

UNION OF INDIA & ORS. …RESPONDENT(S)

J U D G M E N T

ARAVIND KUMAR. J,

1. Leave granted.

2. This appeal is directed against the judgment and order dated 28

June 2019 passed by the High Court of Gujarat in Special Civil

Application No. 2233 of 2016. By the impugned judgment, the High Court

declined to grant the reliefs sought by the appellant, Adani Power Limited,

which had inter alia prayed for a declaration that no customs duty was

leviable on electrical energy generated in its power plant located in a

Special Economic Zone (SEZ) and supplied to the Domestic Tariff Area

(DTA), and for consequential refund of amounts deposited towards such

duty. The High Court took the view that its earlier judgment delivered in

2015 in favour of the appellant was confined to a particular notification

and period, and could not be extended to the later period or to subsequent

notifications issued by the Union. Aggrieved, the appellant has

approached this Court.

2

3. The controversy is not merely fiscal. It raises, in our view,

questions that bear upon three foundational aspects of our legal order: first,

the limits of delegated legislation in matters of taxation; secondly, the

discipline of judicial precedent and the obligation of co-ordinate Benches

to adhere to settled law; and thirdly, the obligation of the State to give

effect to judicial declarations instead of reasserting, in altered form, a levy

already declared to be without authority of law.

4. We have heard Mr. Chidambaram, learned senior counsel

appearing on behalf of the appellant and the learned Raghav Shankar

Additional Solicitor General appearing on behalf of the Respondents and

before proceeding to consider their arguments it would be of relevance to

note the factual background and it reads:

I. FACTUAL BACKGROUND

5. The appellant operates a coal-based thermal power plant of about

5,200 MW capacity within the Mundra Special Economic Zone (SEZ) in

the State of Gujarat. The appellant is a co-developer in that notified SEZ.

The electricity generated at this plant is partly consumed within the SEZ

and substantially supplied to buyers in the DTA, including State utilities.

6. Under the architecture of the Special Economic Zones Act, 2005

(“the SEZ Act”), an SEZ is afforded a special fiscal treatment to encourage

manufacturing and infrastructure creation. Section 30 of the SEZ Act

provides that any goods removed from an SEZ into the DTA shall be

chargeable to duties of customs “as if such goods had been imported into

India”. The intent is to maintain parity between goods physically imported

into India from abroad and goods cleared from an SEZ into the domestic

economy.

3

7. Prior to 2009, electrical energy per se did not attract customs duty

on import. The relevant tariff entry treated imported electricity at a nil rate.

In consequence, though Section 30 of the SEZ Act deems removals from

the SEZ into the DTA to be subject to customs duty “as if imported”,

electrical energy moving from an SEZ to the DTA bore, in practical terms,

no customs duty. The fiscal neutrality in relation to electricity was

maintained in a different way.

8. Rule 47(3) of the SEZ Rules, 2006 recognises that power

generated in an SEZ may also be supplied to the DTA. To prevent misuse

of duty-free inputs, Rule 47(3) provides that where electricity produced

using duty-free inputs in the SEZ is cleared to the DTA, the SEZ unit

would have to make good the customs duty benefit on that proportion of

inputs relatable to the electricity so supplied out of the zone. In effect, the

law captured the customs component in the inputs (for example, imported

coal) to the extent the resulting electricity left the SEZ. The law did not,

however, impose an independent customs duty on the electricity itself.

9. Matters changed in 2010. In the Union Budget of that year, the

Central Government introduced a fiscal measure designed to impose

customs duty on electrical energy cleared from an SEZ to the DTA. Clause

60 of the Finance Bill, 2010 (later enacted in the Finance Act, 2010)

introduced changes to the general customs exemption notification regime

such that electrical energy removed from an SEZ to the DTA would

become liable to duty. What is of significance is that this was stated to

operate retrospectively from 26 June 2009.

10. In anticipation of this change, on 27 February 2010, the Central

Government issued Notification No. 25/2010-Cus. What this notification

purported to do was, in form, to “grant an exemption”; in substance, it

4

introduced a liability. It stipulated that electrical energy cleared from an

SEZ to the DTA would suffer customs duty at 16% ad valorem, with

retrospective effect from 26 June 2009. On the very footing of this

notification, the authorities raised demands upon the appellant for

payment of duty at 16%, not merely prospectively but going back to June

2009.

11. The appellant challenged this levy by filing a writ petition before

the High Court of Gujarat in 2010. The challenge was to the legality and

constitutional validity of the impost on electrical energy so cleared.

During the pendency of the writ petition, the High Court granted interim

relief on 6 May 2010. The appellant was permitted to continue to clear

electricity from the SEZ into the DTA without payment of the disputed

duty, subject to furnishing a bank guarantee to secure the amount in

dispute. The appellant furnished the bank guarantee accordingly. Thus,

though immediate cash outflow was avoided, the alleged liability stood

secured.

12. While the writ petition remained pending, the Union altered the

duty structure. With effect from 16 September 2010, by Notification No.

91/2010-Cus., the earlier 16% ad valorem duty was replaced by a specific-

rate duty of ₹0.10 (ten paise) per unit of electrical energy cleared from the

SEZ to the DTA. Later, with effect from 18 April 2012, by Notification

No. 26/2012-Cus., this was further reduced to ₹0.03 (three paise) per unit.

These subsequent notifications functioned prospectively. They did not,

however, undo the retrospective component of Notification No. 25/2010-

Cus. for the period 26 June 2009 to 15 September 2010.

13. The effect of this shift was twofold. First, for the period 26 June

2009 to 15 September 2010, the authorities asserted a retrospective

5

customs duty at 16% ad valorem under Notification No. 25/2010-Cus.

Secondly, for the period thereafter, the appellant was required to pay, and

did pay, a per-unit customs duty on electrical energy cleared from the SEZ

to the DTA, initially at ten paise per unit and later at three paise per unit,

pursuant to Notification Nos. 91/2010-Cus. and 26/2012-Cus.

14. The appellant persisted with its challenge, maintaining that no

customs duty at all could be lawfully imposed on the clearance of

electrical energy from an SEZ into the DTA, having regard to the statutory

scheme and constitutional limitations. The writ petition came to be finally

heard by a Division Bench of the Gujarat High Court, which, by a

judgment dated 15 July 2015, allowed the Writ petition.

15. The High Court’s 2015 judgment is central or pivotal to the case

on hand. The High Court held, first, that the statutory charge for customs

duty lies in Section 12 of the Customs Act, 1962, read with Entry 83 of

List I of the Seventh Schedule. Section 12 contemplates a levy on goods

“imported into India”. The High Court found that electrical energy

generated within India in an SEZ and wheeled to buyers in the DTA is not,

in substance, a case of “import into India”. An SEZ, while fiscally distinct

in treatment, is not a foreign territory. The legal fiction in Section 30 of

the SEZ Act (“as if imported”) allows ascertainment of the rate of duty

applicable to comparable imports; it does not convert intra-national supply

of electricity into an act of import. There was, therefore, no identifiable

charging event to attract customs duty under Section 12 in respect of such

electricity.

16. The High Court held, secondly, that Notification No. 25/2010-

Cus., though couched as an “exemption” notification, in truth operated as

an instrument to impose duty. Section 25 of the Customs Act empowers

6

the Central Government to exempt, in whole or in part, goods from duty

that is otherwise leviable. That provision is beneficent in nature. It is a

power to relax, not a power to create or levy tax. The High Court

concluded that the Union could not, under the colour of exercising an

exemption power, introduce a new levy at 16% ad valorem and then apply

it retrospectively. The notification was, therefore, beyond the source of

power: a colourable exercise of delegated authority.

17. The High Court held, thirdly, that the retrospective fastening of a

16% levy from 26 June 2009 violated the discipline of Article 265 of the

Constitution which declares that no tax shall be levied or collected except

by authority of law. The Court found that the executive could not, by

subordinate legislation, retrospectively cast a tax liability for a past period

absent of a clear charging sanction from Parliament. Once the basic levy

was itself ultra vires, its retrospective application necessarily fails.

18. The High Court held, fourthly, that the structure of the levy created

an arbitrary and unfair double burden. The SEZ Rules already ensured

that, to the extent electricity left the zone for the DTA, the benefit of duty-

free inputs was clawed back. If, in addition, customs duty were again

recovered on the electricity so supplied, the same economic stream i.e.,

generation and sale of power would be subjected twice to customs

incidence: once through neutralisation of duty on inputs, and again on

clearance of the output. That, the Court held, was arbitrary.

19. For these reasons, the High Court in 2015 struck down the levy of

customs duty on electrical energy cleared by the appellant from its SEZ

unit into the DTA for the period 26 June 2009 to 15 September 2010. The

offending notification and the enabling clause in the Finance Act were

quashed to that extent as being ultra vires both the Customs Act and the

7

Constitution. The appellant’s bank guarantee was directed to be released.

The High Court thus, in substance, declared that, on the statutory scheme

as it then stood, customs duty could not be demanded on the appellant’s

SEZ-to-DTA power clearances.

20. The Union of India carried the matter to this Court. On 20

November 2015, this Court declined to interfere with the judgment of the

High Court. A subsequent review petition filed by the Union of India was

dismissed in April 2016. The declaration of law made by the High Court,

therefore, attained finality at least as between the parties, and in practical

terms within the territorial jurisdiction of that High Court.

21. Thereafter, with effect from 16 February 2016, the Union issued

Notification No. 9/2016-Cus. Under this measure, clearances of electrical

energy from certain large SEZ-based generating stations (including the

appellant’s, which has capacity in excess of 1000 MW and was approved

prior to 27 February 2009) into the DTA were placed at a nil rate of

customs duty. Thus, prospectively from 16 February 2016, the levy itself

was withdrawn insofar as the appellant was concerned.

22. What remained live, however, was the period between 16

September 2010 and 15 February 2016. For that period, the appellant had

paid per-unit customs duty at ten paise and three paise pursuant to

Notification Nos. 91/2010-Cus. and 26/2012-Cus. respectively. After the

2015 judgment, the appellant sought refund of those amounts, contending

that once the High Court had declared that no customs duty could be

imposed on SEZ–to–DTA electricity clearances, any amount collected

under the same head, though at a different rate and prospectively, were

liable to be refunded.

8

23. The appellant thereafter instituted Special Civil Application No.

2233 of 2016 before the High Court of Gujarat. In the said writ petition,

the appellant prayed for (i) a declaration that no customs duty was leviable

on clearances of electricity from its SEZ unit to the DTA for the

subsequent period as well; (ii) directions restraining the authorities from

seeking to recover such duty; and (iii) consequential refund of the amounts

already deposited under protest towards such levy for the period after 15

September 2010 and prior to 16 February 2016.

24. The writ petition of 2016 came to be adjudicated by a Division

Bench of the High Court and by judgment dated 28 June 2019, which is

the subject of this appeal, the High Court dismissed the writ petition.

25. The reasoning of the High Court in 2019 was as follows:

The Court held that the 2015 judgment dealt with Notification No.

25/2010-Cus., which had imposed the 16% retrospective levy up to 15

September 2010, and that the relief granted was explicitly limited to said

period only. The High Court observed that subsequent notifications,

namely, Notification No. 91/2010-Cus. prescribing ten paise per unit, and

Notification No. 26/2012-Cus. prescribing three paise per unit were not

expressly struck down in the 2015 proceedings. The Court stated that

unless the validity of those later notifications was specifically challenged,

no refund could be ordered in respect of amounts paid thereunder. On that

basis, the High Court refused to direct refund, and it declined to extend

the protective declaration of 2015 into the later period.

26. It is this approach which is under challenge before us.

9

II. SUBMISSIONS OF THE PARTIES

27. Shri. Chidambaram, Learned senior counsel appearing for the

appellant submitted that the High Court, under the impugned judgment,

failed to give effect to its own prior declaration of law. It was urged that

the judgment of 15 July 2015 did not merely grant a one-time relief

confined to a single notification; rather, it declared, as a matter of

principle, that on the statutory framework as it then existed, customs duty

could not be levied on the clearance of electrical energy from an SEZ to

the DTA. That declaration, affirmed by this Court, was binding on the

subsequent co-ordinate Bench of the High Court. It was submitted that

there was no change in the law or in the underlying facts between 15

September 2010 and 15 February 2016. Consequently, the same legal

consequence ought to have followed for that entire period.

28. Learned senior counsel further submitted that Section 30 of the

SEZ Act requires parity of treatment. Goods removed from an SEZ into

the DTA are to bear the same customs duty “as if imported into India”.

Imported electrical energy has consistently stood at a nil rate of customs

duty. Therefore, electrical energy cleared from an SEZ to the DTA must

equally attract nil customs duty. Imposing duty on SEZ-generated

electricity while imported electricity carries no duty produces an artificial

and constitutionally suspect classification. It was urged that such a

differential treatment directly defeats the object of the SEZ Act and

violates Article 14 of the Constitution.

29. It was next contended for the appellant that the Union could not,

by issuing successive notifications at progressively lower rates (16% ad

valorem; thereafter ten paise per unit; thereafter three paise per unit),

achieve indirectly that which the High Court had already pronounced to

10

be ultra vires. The appellant referred to the doctrine that a levy which is

fundamentally unauthorised does not become lawful merely because the

rate is altered, or because it is framed as prospective rather than

retrospective. If the source is bad, every derivative iteration is equally bad.

30. Learned senior counsel also drew attention to the manner in which

the levy was originally structured. Notification No. 25/2010-Cus.

purported, on its face, to be an “exemption” notification. In reality, it

operated as a charging instrument, introducing for the first time a 16%

duty on electricity routed from the SEZ to the DTA, and doing so with

retrospective effect. It was submitted that the power conferred by Section

25 of the Customs Act is a power to exempt goods from duty otherwise

leviable; it is not a power to create a fresh levy in the first place. The use

of an exemption notification to impose duty was, therefore, a colourable

exercise of delegated legislation and fell foul of administrative law

principles. According to the appellant, the High Court in 2015 correctly

interdicted that exercise, and the same vice afflicts the subsequent

notifications.

31. Learned senior counsel for the appellant submitted that the High

Court in 2019 erred in accepting the plea of the respondents that no relief

could be granted unless the subsequent notifications (Nos. 91/2010-Cus.

and 26/2012-Cus.) were specifically impugned. It was urged that the

appellant’s 2016 writ petition was not a fresh challenge launched in

isolation; it was a sequel proceeding seeking enforcement of the 2015

declaration of law and refund of amounts deposited under protest pursuant

to a levy that had already been held to be without authority of law. Once

the foundational illegality of the levy was judicially determined, the State

could not insist that each successive notification, though resting on the

same ultra vires premise, must be struck down afresh before relief could

11

follow. Such a view, it was submitted, would elevate procedural form over

substantive illegality and would compel endless cycles of litigation on the

same point.

32. It was lastly urged on behalf of the appellant that the doctrine of

finality in adjudication, and the principle that litigation must at some stage

come to an end, require that constitutional courts give effect to their own

pronouncements in substance and not permit executive re-litigation of

what has already been decided. The appellant, having succeeded in 2015

and having seen that decision withstand challenge before this Court, ought

not to have been denied consequential relief merely because the levy later

reappeared at a different numerical rate.

33. Per contra, Shri. Raghav Shankar , the learned Additional Solicitor

General, appearing for the Union of India and the customs authorities,

supported the impugned judgment. The thrust of the Union’s submission

was that the 2015 judgment of the High Court was concerned with

Notification No. 25/2010-Cus., which imposed a levy of 16% ad valorem

duty with retrospective effect up to 15 September 2010. It is further

submitted that the relief granted in that case was expressly circumscribed

to that period.

34. The learned Additional Solicitor General contended that the

subsequent notifications, namely Notification No. 91/2010-Cus. (ten paise

per unit) and Notification No. 26/2012-Cus. (three paise per unit),

operated prospectively for later periods and at nominal specific rates.

According to the Union, those notifications represented a different fiscal

measure with a distinct objective: namely, to recoup, in part, the customs

duty benefit on duty-free inputs where power so generated was supplied

12

into the DTA. It was urged that these later notifications were not placed

under specific challenge in the first writ petition decided in 2015.

35. The Union further submitted that even in the appellant’s 2016 writ

petition, the later notifications were not, in form, separately impugned. On

that basis, it was contended that the High Court in 2019 was correct in

refusing to quash those notifications or to direct refund of the amounts

paid pursuant thereto, as no court can strike down a statutory instrument

or direct restitution on its basis unless that instrument is first subjected to

judicial review.

36. It was also submitted on behalf of Union of India that the appellant

had, for years, paid the reduced per-unit duty without protest in respect of

the post-September 2010 period, and that a belated attempt to seek refund,

after success in respect of an earlier, different notification, ought to be

viewed with circumspection.

37. It was lastly submitted that, with effect from 16 February 2016,

the policy had already been calibrated by Notification No. 9/2016-Cus.,

which exempted power from large SEZ units such as the appellant’s. Thus,

according to the Union, the grievance substantially stood redressed

prospectively. What remained, in its submission, was a monetary claim

for an intervening period, which the High Court correctly declined to

entertain in the absence of a specific and direct challenge to the

notifications governing that period on these grounds he sought for

rejection of the appeal.

III. ISSUES FOR DETERMINATION

38. From the rival submissions and the record before us, the following

questions arise for consideration:

13

I. Firstly, what, in law, did the Gujarat High Court decide in its

judgment dated 15 July 2015, and what is the true scope of that

decision?

II. Secondly, whether, in the period subsequent to 15 September 2010

and prior to 16 February 2016, there was any material changes in

the statutory position or factual footing that would justify a

different result from that arrived at in 2015 judgment?

III. Thirdly, whether the High Court, in its impugned judgment of 28

June 2019, was justified in holding that no relief could be granted

to the appellant in the absence of a specific and fresh challenge to

Notification Nos. 91/2010-Cus. and 26/2012-Cus?

IV. Fourthly, whether, in view of the 2015 declaration of law and its

affirmation, the High Court in 2019 was at liberty, being a co-

ordinate Bench, to deny relief by narrowing the effect of the earlier

pronouncement?

V. Fifthly, what order/direction?

IV. ANALYSIS

39. Before proceeding with the analysis of the issues framed above, it

would be necessary to reproduce certain relevant statutory provisions

which would be necessary for the adjudication of these issues.

Accordingly we have reproduced all the relevant statutory provisions.

40. Section 12 of the Customs Act, 1962 for reference:

12. Dutiable goods.—(1) Except as otherwise provided in this Act,

or any other law for the time being in force, duties of customs shall

be levied at such rates as may be specified under the Customs Tariff

Act, 1975 (51 of 1975), or any other law for the time being in force,

on goods imported into, or exported from, India. (2) The provisions

of sub-section (1) shall apply in respect of all goods belonging to

Government as they apply in respect of goods not belonging to

Government.

14

41. Section 30 of The Special Economic Zones Act, 2005 for

reference:

30. Domestic clearance by Units.—Subject to the conditions

specified in the rules made by the Central Government in this

behalf,— (a) any goods removed from a Special Economic Zone to

the Domestic Tariff Area shall be chargeable to duties of customs

including anti-dumping, countervailing and safeguard duties under

the Customs Tariff Act, 1975 (51 of 1975), where applicable, as

leviable on such goods when imported; and (b) the rate of duty and

tariff valuation, if any, applicable to goods removed from a Special

Economic Zone shall be at the rate and tariff valuation in force as on

the date of such removal, and where such date is not ascertainable,

on the date of payment of duty.

42. Rule 47 of The Special Economic Zones Rules, 2006 for

reference:

47. Sales in Domestic Tariff Area—

(1) A Unit may sell goods and services including rejects or

wastes or scraps or remnants or broken diamonds or by products

arising during the manufacturing process or in connection therewith,

in the Domestic Tariff Area on payment of Customs duties under

section 30, subject to the following conditions, namely-

(a) Domestic Tariff Area sale under sub-rule (1), of

goods manufactured by a Unit shall be on submission of

import licence, as applicable to the import of similar goods

into India, under the provisions of the Foreign Trade Policy:

Provided that goods imported or procured from the

Domestic Tariff Area and sold as such without being subjected

to any manufacturing process shall be subject to the provisions

of the Foreign Trade Policy as applicable to import of similar

goods into India.

(b) Domestic Tariff Area sale under sub-rule (1) of

rejects or scrap or waste or remnants arising during the

manufacturing process or in connection there-with by the Unit

shall not be subject to the provisions of the Import Trade

Control (Harmonized System) of Classification of Export and

Import Items:

Provided that the Central Government may notify

restrictions, as it deems fit on all or any class of such goods

mentioned under this clause.

15

(2) Scrap or dust or sweeping of gold or silver or platinum may

be sent to Government of India Mint or Private Mint from a Unit and

returned in standard bars in accordance with the procedure specified

by Customs authorities or may be sold in the Domestic Tariff Area

on payment of duty on the gold or silver or platinum content in the

said scrap:

Provided that the value of samples of gold or silver or platinum

sweepings or scrap or dust taken at the time of clearance and sent to

the Government Mint or Private Mint for assaying and assessment

shall be finalized on the basis of reports received from the

Government Mint or Private Mint, as the case may be.

(3) Surplus power generated in a Special Economic Zone’s

Developer’s Power Plant in the SEZ or Unit’s captive power plant or

diesel generating set may be transferred to Domestic Tariff Area on

payment of duty on consumables and raw materials used for

generation of power subject to the following conditions, namely:

(a) proposal for sale of surplus power received by the

Development Commissioner shall be examined in consultation

with the State Electricity Board, wherever considered

necessary: Provided that consultation with State Electricity

Board shall not be required for sale of power within the same

Special Economic Zone;

(b) norms for production of a unit of power shall be

approved by the Approval Committee;

(c) sale of surplus power to other Unit or Developer in

the same or other Special Economic Zone or to Export

Oriented Unit or to Electronic Hardware Technology Park Unit

or to Software Technology Park Unit or Bio-technology Park

Unit, shall be without payment of duty;

(d) for sale of surplus power in Domestic Tariff Area, the

Unit shall obtain permission from the Specified Officer and the

State Government authority concerned;

(e) duty on sale of surplus power to the Domestic Tariff

Area shall be as provided for in this rule.

(4) Valuation and assessment of the goods cleared into

Domestic Tariff Area shall be made in accordance with Customs Act

and rules made there under. 160

(5) Refund, Demand, Adjudication, Review and Appeal with

regard to matters relating to authorised operations under Special

Economic Zones Act, 2005, transactions, and goods and services

related thereto shall be made by the Jurisdictional Customs and

Central Excise Authorities in accordance with the relevant

provisions contained in the Customs Act, 1962, the Central Excise

Act, 1944, and the Finance Act, 1994 and the rules made there under

or the notifications issued there under.

16

43. Section 25 of The Customs Act, 1962 for reference:

25. Power to grant exemption from duty.—(1) If the Central

Government is satisfied that it is necessary in the public interest so

to do, it may, by notification in the Official Gazette, exempt

generally either absolutely or subject to such conditions (to be

fulfilled before or after clearance) as may be specified in the

notification goods of any specified description from the whole or

any part of duty of customs leviable thereon.

(2) If the Central Government is satisfied that it is necessary in the

public interest so to do, it may, may, by special order in each case,

exempt from the payment of duty, under circumstances of an

exceptional nature to be stated in such order, any goods on which

duty is leviable.

(2A) The Central Government may, if it considers it necessary or

expedient so to do for the purpose purpose of clarifying the scope or

applicability of any notification issued under sub-section (1) or order

issued under sub-section (2), insert an explanation in such

notification or order, as the case may be, by notification in the

Official Gazette, at any time within one year of issue of the

notification under sub-section (1) or order under sub-section (2), and

every such explanation shall have effect as if it had always been the

part of the first such notification or order, as the case may be.

(3) An exemption under sub-section (1) or sub-section (2) in respect

of any goods from any part of the duty of customs leviable thereon

(the duty of customs leviable thereon being hereinafter referred to as

the statutory duty) may be granted by providing for the levy of a

duty on such goods at a rate expressed in a form or method different

from the form or method in which the statutory duty is leviable and

any exemption granted in relation to any goods in the manner

provided in this sub-section shall have effect subject to the condition

that the duty of customs chargeable on such goods shall in no case

exceed the statutory duty.

Explanation.—”Form or method‖, in relation to a rate of duty of

customs, means the basis, namely, valuation, weight, number,

length, area, volume or other measure with reference to which the

duty is leviable.

(4) Every notification issued under sub-section (1) or sub-section

(2A) shall, unless otherwise provided, come into force on the date

of its issue by the Central Government for publication in the Official

Gazette.

* * * * *

(6) Notwithstanding anything contained in this Act, no duty shall be

collected if the amount of duty leviable is equal to, or less than, one

hundred rupees.

17

(7) The mineral oils (including petroleum and natural gas) extracted

or produced in the continental continental shelf of India or exclusive

economic zone of India as referred to in section 6 and section 7,

respectively, of the Territorial Waters, Continental Shelf, Exclusive

Economic Zone and Other Maritime Zones Act, 1976 (80 of 1976),

and imported prior to the 7th day of February, 2002 shall be deemed

to be and shall always be deemed to have been exempted from the

whole of the duties of customs leviable on such mineral oils and

accordingly, notwithstanding anything contained in any judgment,

decree or order of any court, tribunal or other authority, no suit or

other proceedings in respect of such mineral oils shall be maintained

or continued in any court, tribunal or other authority.

(8) Notwithstanding the exemption provided under sub-section (7),

no refund of duties of customs paid in respect of the mineral oils

specified therein shall be made.

RE: QUESTION I – SCOPE AND EFFECT OF THE 2015

JUDGMENT

44. We turn first to the 2015 judgment. The High Court there did four

things of significance. It examined (i) the constitutional and statutory basis

of the levy; (ii) the character of the notification said to impose it; (iii) the

retrospective enforcement of that levy; and (iv) the arbitrariness inherent

in the structure of the levy.

45. On the constitutional and statutory basis, the High Court held that

the levy was ultra vires because there was, in substance, no “import into

India” that could trigger the charge under Section 12 of the Customs Act.

This went to the very root of the matter. The Court was not deciding a

mere technical irregularity. It held that the alleged taxable event did not

exist in law. The absence of a taxable event is a jurisdictional defect.

46. On the character of the notification, the High Court found that the

Union had attempted, by Notification No. 25/2010-Cus., to employ the

language of an “exemption” notification to in fact impose and quantify a

new levy of 16% on SEZ–to–DTA power clearances. The High Court held

18

that Section 25 of the Customs Act is a power to relax duty, not a power

to invent it. This was a finding on the limits of delegated legislation.

47. On retrospectivity, the High Court found that fastening a 16% ad

valorem duty with effect from 26 June 2009 through delegated action

offended Article 265 of the Constitution, which requires authority of law

for every tax levy and collection.

48. On arbitrariness, the High Court found that the structure of the

levy burdened the appellant twice over i.e., once by drawback of duty on

inputs under Rule 47(3) of the SEZ Rules, and then again by demanding

customs duty on the final electricity output itself.

49. These findings were not casual or incidental. They were the

foundation upon which the High Court granted relief. The Court did not

say merely that Notification No. 25/2010-Cus. Suffered from a drafting

defect. It said, in substance: (i) there is no lawful charging event in respect

of this commodity when cleared from an SEZ to the DTA; (ii) the Union

cannot use an exemption notification to create a duty that Parliament has

not imposed; (iii) retrospective demand without statutory sanction violates

Article 265; and (iv) the structure produces arbitrary double burden.

50. We are of the clear view that these four propositions together

constitute the ratio decidendi of the 2015 judgment. It follows that the

2015 judgment was not confined, in principle, to a single notification or

to a particular cut-off date. The declaration of law extended to the very

authority to levy customs duty on electrical energy cleared from an SEZ

to the DTA in the statutory setting then prevailing. Absence a change in

that setting, that declaration governed all periods standing on the same

footing.

19

51. Accordingly we hold that the judgment of the Gujarat High Court

dated 15 July 2015 was not a limited adjudication confined to the validity

of one notification or to a closed span of time. It was a declaration of law

founded on constitutional and statutory interpretation, determining that on

the then-existing legal framework no customs duty could be levied on

electrical energy transmitted from an SEZ to the DTA. The reasoning of

said decision went to the very root of the taxing power i.e., it identified

the absence of a charging event, the misuse of the exemption power, and

the inherent arbitrariness of the scheme. Once such a declaration of law

was rendered and affirmed by this Court, it acquired binding normative

force and governed all transactions resting on the same legal footing. The

essence of that pronouncement was not temporal but structural; it struck

at the authority to levy, not merely at the rate or the period. The 2015

judgment therefore stands as a general exposition of law, and its ratio

decidendi covers the subsequent period unless a demonstrable change in

the legal foundation is shown.

RE: QUESTION 2 – WHETHER ANY CHANGE IN STATUTORY

OR FACTUAL FOOTING JUSTIFIED A DIFFERENT RESULT

52. We next turn to an aspect which, in our view, requires emphasis:

the use of an “exemption” notification to impose, in substance, a levy.

53. Section 25 of the Customs Act authorises the Central Government,

if it is satisfied that it is necessary in the public interest so to do, to exempt

generally either absolutely or subject to conditions goods of any specified

description from the whole or any part of customs duty leviable thereon.

The premise of Section 25 is that there is a duty “leviable thereon” in the

first place. The function of an exemption notification is, therefore, to relax

or remit a duty already otherwise attracted by law.

20

54. What Notification No. 25/2010-Cus. did, however, was precisely

the reverse. It purported to declare, for the first time, that electrical energy

cleared from an SEZ to the DTA would be subjected to customs duty at

the rate of 16% ad valorem. The instrument was dressed in the garb of an

exemption, but its true operation was to create a duty where none existed,

and to quantify that duty, and to apply it retrospectively.

55. In administrative law terms, this is a classic instance of a

colourable exercise of delegated power. A delegate cannot do indirectly

what it has no authority to do directly. The power to exempt is not a power

to tax. The two stand on opposite constitutional planes. The essential

legislative function of imposing a tax or duty rests with Parliament and

must be located in a charging provision. The executive cannot, by

subordinate instrument, enlarge the field of taxation under the pretext of

tailoring an exemption.

56. We consider it necessary to state this principle clearly. Delegated

legislation is subject to judicial review not only for substantive

unreasonableness, but also for purpose. Where the dominant purpose for

which a delegated power is conferred is departed from, and the power is

pressed into service to achieve an end for which it was never granted, the

exercise is ultra vires. The immunity of a fiscal notification from scrutiny

is no greater than that of any other form of subordinate legislation.

57. The High Court in 2015 correctly detected that inversion: a

provision designed to grant relief (exemption) had been inverted to impose

a burden (levy). Such inversion is not a mere irregularity; it is an illegality

at source. The said finding of the High Court is in consonance with settled

principles of law declared by this Court. Hence, we affirm said finding.

21

58. That conclusion has a direct bearing on the respondent’s present

defence. If the very manner in which the levy was introduced was beyond

the scope of delegated authority, then subsequent notifications which

continue to demand duty on the same taxable fiction namely, that SEZ-

to-DTA electricity is to be treated as exigible to customs duty cannot be

insulated merely because they altered the rate from 16% to ten paise to

three paise, or because they framed the imposition of customs duty

prospectively. In other words, where the root is ultra vires, the branch

cannot claim legitimacy by altering its foliage.

59. We must also underline a basic proposition of fiscal jurisprudence:

a tax or duty can only be levied where there is (i) a clear charging provision

enacted by competent legislature; (ii) an identifiable taxable event; and

(iii) a statutory rate-making mechanism. The machinery provisions may

regulate assessment and collection. Exemption notifications may relax or

remit the levy. But neither machinery provisions nor exemption

notifications can substitute for the absence of a charge.

60. Section 12 of the Customs Act is the charging provision. It

contemplates a duty on goods imported into India. Section 30 of the SEZ

Act says that goods cleared from an SEZ to the DTA “shall be chargeable

to duties of customs as leviable on such goods when imported”. This is a

parity clause. It says: treat SEZ-to-DTA clearances as if they bore the

same duty as comparable imports. It does not say: regard every SEZ-to-

DTA clearance as an “import into India” for all purposes of Section 12,

irrespective of physical reality, and irrespective of whether such imports

actually bear any duty.

61. The High Court in 2015 correctly held that electrical energy

generated within India and wheeled into the DTA is not, in truth, a case of

22

import into India. The deeming fiction of Section 30 of the SEZ Act is

intended to align duty treatment, not to expand the scope of the charging

section beyond what Parliament has enacted. A deeming fiction cannot be

pressed beyond the purpose for which it was enacted.

62. Put differently: Section 30 of the SEZ Act does not create a new

customs levy. It only says that if (and to the extent that) such goods would

have attracted customs duty had they physically crossed the border, then

the same incidence will apply when those goods move from the SEZ to

the DTA. If, on actual import, electrical energy attracts no customs duty,

then, by force of Section 30, the same result i.e., no customs duty must

follow for SEZ clearances of electrical energy. Nothing in Section 30

either authorises or contemplates the imposition of a fresh or differential

levy singling out SEZ-generated power.

63. This parity logic sits at the centre of the scheme. Imported

electricity bore no customs duty. SEZ electricity a like commodity was

nonetheless subjected to duty. That differential treatment violates both the

statutory parity mandated by Section 30 of the SEZ Act and the equality

guarantee under Article 14. The High Court in 2015 captured this, and we

reaffirm it.

64. The Union urged before us that the per-unit duties of ten paise and

three paise were meant to recoup, in part, the benefit of duty-free inputs

such as imported coal. That argument does not survive scrutiny. Rule

47(3) of the SEZ Rules already obliges the SEZ power generator, when

electricity leaves the SEZ, to neutralise the customs duty foregone on

inputs to that extent. The scheme already accounts for input duty benefit.

Having so neutralised, to then impose an additional customs duty on the

23

electricity output itself is to double count. That offends fairness and

constitutional discipline.

65. On a plain application of the principles governing the power to

tax, we are satisfied that the levy on electricity generated in the Special

Economic Zone and supplied to the Domestic Tariff Area, as sought to be

enforced against the appellant, has no sanction in law. The charge does

not find support in the statutory scheme. We also find that, even after the

decision rendered in 2015, there has been no change either in the law or

in the relevant facts which could justify taking a view different from the

one already taken. The legal position having remained the same, the

conclusion reached earlier must continue to hold the field. Section 30 of

the SEZ Act continued unchanged; the Customs Tariff continued to

prescribe a nil rate on imported electrical energy; and the constitutional

parameters of Articles 14 and 265 remained constant. The subsequent

notifications merely varied the form and rate of duty; they did not cure the

fundamental absence of authority to tax. The attempt of the executive to

reintroduce the very same levy through the route of an “exemption”

notification cannot be sustained. What could not be done directly has been

sought to be achieved indirectly, which is impermissible in law and

contrary to the limits of delegated power. Section 25 of the Customs Act

confers a power to exempt, not to impose. To use it as an instrument of

levy transgresses the limits of delegated legislation and amounts to

usurpation of the legislative function. The Court’s duty of judicial review

extends to restraining such misuse of delegated authority. Hence, in

substance and in law, the position after 2015 remained identical to what

it was before; the same illegality persisted, and the same conclusion

necessarily follows.

24

RE: QUESTION III – RE: GRANT OF RELIEF IN THE ABSENCE

OF A SEPARATE CHALLENGE TO THE EXEMPTION

NOTIFICATIONS

66. We now turn to what was pressed by the respondents both before

the High Court in 2019 and before us: namely, that the later notifications

(Notification No. 91/2010-Cus. prescribing ten paise per unit and

Notification No. 26/2012-Cus. prescribing three paise per unit) were not

specifically impugned by the appellant, and therefore, absent a direct

attack on their validity, no relief could be granted in respect of amounts

paid thereunder.

67. We are unable to accept said contention. It proceeds on a

misconception of what was before the High Court in 2016 and what was

finally decided in 2015.

68. The appellant’s 2016 writ petition was not an abstract attempt to

launch a fresh constitutional challenge to each successive notification in

isolation. It was a sequel proceeding.

69. In administrative law, where a court of competent jurisdiction has

struck down the foundation of a levy as ultra vires, that declaration renders

all successive and derivative attempts to enforce the same levy equally

unenforceable, unless the statutory or factual basis has materially changed.

The State cannot defend the continuation of the same vice by saying, this

is a different notification number. The Court is bound to look past the label

and examine the substance.

70. To insist that the appellant ought to have challenged Notification

No. 91/2010-Cus. and Notification No. 26/2012-Cus. afresh, when those

notifications do no more than perpetuate the same unauthorised levy in

25

altered denomination, is to elevate form over substance. Constitutional

adjudication does not proceed on technical formalism when illegality has

already been declared in principle.

71. This Court, while exercising jurisdiction under Article 136, and

the High Court, while exercising jurisdiction under Article 226, are vested

with ample power to mould appropriate relief. Once a levy has been held

to be beyond the authority of law, a constitutional court is not expected to

remain a silent spectator while the very same levy is sought to be

continued through successive or similar notifications. The jurisdiction of

a constitutional court is remedial in nature and extends to ensuring that

what has been declared unlawful is not brought back in another form. The

contention that “no relief can be granted unless each successor notification

is separately struck down” is inconsistent with that remedial character, and

would reward repetition of illegality. We reject it.

72. We also find that there is no material factual distinction between

the levy struck down in 2015 and the levy sought to be enforced thereafter

against the appellant for the period between 16 September 2010 and 15

February 2016. The commodity is the same (electrical energy). The

movement is the same (SEZ to DTA). The asserted source of power is the

same (customs levy under colour of Section 25 of the Customs Act read

with Section 30 of the SEZ Act). The only difference lies in the numerical

rate and the period for which it applies. Those differences do not cure the

fundamental absence of a lawful charging event and the misuse of an

exemption mechanism to impose duty. The levy is the same in character,

and it is that character which was condemned.

73. In our view, the High Court, in its judgment of 2019, fell into error

in accepting the submission of the Union that the later notifications

26

continued to operate merely because they were not specifically set aside

in the decision of 2015. Once the levy itself had been held to be without

authority of law, its continuance through subsequent notifications could

not be sustained. The invalidity goes to the root and does not depend upon

the form or sequence of the notifications. We reject the respondents’

contention that the appellant could not be granted relief because the later

notifications were not independently impugned.

74. We accordingly hold that where a levy has been declared to be

without authority of law, a subsequent petition seeking enforcement of

that declaration and consequential relief cannot be treated as a fresh

challenge merely because the levy is sought to be continued under later or

similar notifications. In the absence of any new statutory basis, such

notifications do not create a new cause of action. A constitutional court

is entitled to grant effective relief without insisting upon separate

challenges to each such notification. The High Court, in the impugned

judgment of 2019, erred in taking a contrary view.

RE: QUESTION IV – EFFECT OF A BINDING DECLARATION

ON A LATER CO-ORDINATE BENCH

75. There remains one further aspect of principle. The High Court’s

judgment of 15 July 2015 striking down the levy of customs duty on SEZ-

to-DTA electrical energy was delivered by a Division Bench of that Court.

The Union of India challenged that judgment before this Court. This Court

declined interference. The High Court’s judgment thereby attained

finality, both as between the parties and as a binding declaration of law

within that jurisdiction.

76. The writ petition filed in 2016 by the appellant came to be heard

in 2019 by another Division Bench of the same High Court. That Bench,

27

while noting the existence of the 2015 judgment, proceeded on the basis

that the earlier decision was confined to Notification No. 25/2010-Cus.

and to the period ending 15 September 2010. Having so read it down, the

Bench in 2019 declined to extend relief to what it viewed as a “different”

set of notifications.

77. The discipline expected of coordinate Benches does not permit

such an approach. This Court, in State of Uttar Pradesh v. Ajay Kumar

Sharma (2016) 15 SCC 289, has reiterated that once a coordinate Bench

of a High Court has settled a question of law, a subsequent Bench of equal

strength is bound to follow that view when confronted with the same issue.

If the later Bench believes that the earlier view is so manifestly erroneous

or inapplicable that it ought not to be followed, the later Bench must refer

the matter to a larger Bench for reconsideration. What it cannot do is to

sidestep or whittle down the earlier pronouncement by confining it

artificially or by treating it as a fact-specific indulgence.

78. The discipline of precedent is not a matter of personal

predilection; it is an institutional necessity. Stare decisis et non quieta

movere which means to stand by what is decided and not to disturb what

is settled, is a working rule which secures stability, predictability and

respect for judicial outcomes. The law cannot change with the change of

the Bench.

79. In the present case, if the Division Bench in 2019 was of the

opinion that the 2015 decision could not, or ought not, apply to the later

notifications or to the later period, the proper course was to request that

the question be placed before a larger Bench of the High Court. The Bench

in 2019 did not do so. Instead, it narrowed the effect of the 2015 judgment

and declined relief for the subsequent years. That course was

28

impermissible. The 2019 Bench was bound by the declaration of law in

2015, unless duly referred to a larger Bench.

80. We accordingly hold that the Division Bench of 2019 acted

contrary to the settled doctrine of judicial discipline. When a coordinate

Bench of a High Court has already determined a question of law, a

subsequent Bench of equal strength is bound to follow that view; if it

doubts its correctness, the only permissible course is to refer the matter to

a larger Bench. This rule, has been reaffirmed by this Court in State of

U.P. v. Ajay Kumar Sharma (2016) 15 SCC 289, is not procedural

etiquette but a structural safeguard against judicial inconsistency. The

discipline of stare decisis ensures coherence and predictability in law,

which are indispensable to the legitimacy of adjudication. The 2019

Bench, by confining the earlier decision to a narrow time frame without

referring the matter to a larger Bench, effectively unsettled a settled

proposition and undermined the authority of precedent. Such a course was

impermissible. The coordinate Bench was duty-bound to apply the ratio

of the 2015 judgment to the appellant’s case, and its failure to do so

vitiates the impugned decision.

81. We now turn to an aspect which goes beyond the immediate

dispute between the parties. The case also concerns the obligation of the

administration to give full effect to judicial decisions once they have

attained finality. The authority of the rule of law rests not only in the

pronouncement of judgments but equally in their proper implementation.

It is therefore necessary to briefly recall the principles that govern the

conduct of the executive after a court has finally settled the legal position.

82. When a High Court of competent jurisdiction declares a levy to be

ultra vires and unconstitutional, and this Court declines to interfere, that

29

declaration cannot be treated as a one-time indulgence for a closed period.

It is incumbent upon the authorities thereafter to conform their conduct to

the law so declared. They cannot, consistent with constitutional discipline,

continue to enforce the same levy for a later period on the strength of

slightly altered subordinate instruments and then resist restitution on

grounds of technical pleading.

83. It is well settled that in the public interest there must be an end to

litigation. The appellant succeeded in 2015. The Union failed in its

challenge before this Court. The appellant then approached the High Court

in 2016 essentially seeking implementation of the declaration already

made. To deny relief on the footing that it is a new notification or that

period was not expressly mentioned is to frustrate finality and to compel

the citizen to engage in repetitive litigation to secure, in practice, what has

already been recognised in principle.

84. Accordingly we hold that once the 2015 judgment had declared

the levy to be ultra vires and this Court had declined interference, it was

incumbent upon the administrative authorities to conform their conduct to

that declaration. Judicial pronouncements are not advisory opinions; they

are binding commands of law. When the executive continues to enforce,

under new guise, a levy that has been judicially struck down, it acts in

defiance of constitutional discipline and erodes public confidence in the

rule of law. Finality of adjudication is an essential component of good

governance. The repetition of an invalidated levy through successive

notifications compels needless litigation, burdens the courts, and subjects

citizens to prolonged uncertainty. The authorities in this case were obliged

to treat the matter as concluded and ought to have extended the benefit of

the 2015 decision uniformly to all subsequent periods until the law was

altered by legislative action. Their failure to do so justified judicial

30

intervention. The doctrine interest reipublicae ut sit finis litium which

essentially means, that it is in the public interest that there be an end to

litigation would squarely apply; the State must exemplify obedience to

judgments, not resistance to them.

85. This litigation has spanned more than a decade. The substantive

question at its core was only this: whether, in the absence of a clear

charging section, customs duty could be imposed on electrical energy

cleared from an SEZ into the DTA? And, according to our observations

above it stood answered in 2015 and that answer withstood scrutiny by

this Court also. What ought to have followed thereafter was faithful

implementation, not renewed resistance.

86. Accordingly, we summarise our conclusions as follows:

(i) The Gujarat High Court’s judgment dated 15 July 2015, as a matter of

law, declared that customs duty could not be levied on electrical energy

cleared from the appellant’s SEZ unit to the DTA, having regard to the

absence of a lawful charging event under Section 12 of the Customs Act,

the limited scope of Section 25 of that Act, the parity requirement of

Section 30 of the SEZ Act and the constitutional constraints of Articles 14

and 265 is squarely applicable to the judgment and order dated

28.06.2019.

(ii) That declaration was not confined in principle to Notification No.

25/2010-Cus. or to the period ending 15 September 2010. It went to the

authority to levy customs duty on SEZ-to-DTA electricity clearances in

the statutory setting then obtaining.

(iii) The subsequent notifications namely, Notification No. 91/2010-Cus.

prescribing ten paise per unit and Notification No. 26/2012-Cus.

31

prescribing three paise per unit, did not create a new levy on a new footing.

They merely continued the same levy in altered form. The change in

arithmetical rate by prospective character does not cure the lack of

authority in principle.

(iv) The argument that no relief could be granted in the absence of a fresh

and specific challenge to each later notification is untenable. The

appellant’s 2016 writ petition was a sequel, seeking enforcement of the

prior declaration and refund of amounts deposited under protest.

Constitutional courts are empowered to secure compliance with their own

pronouncements and are not bound to insist on repetitive challenges to

substantially identical measures.

(v) There was no material change in law or fact between 15 September

2010 and 15 February 2016 that would justify a departure from the 2015

ruling. Section 30 of the SEZ Act remained unaltered. Imported electrical

energy bore no customs duty under the Customs Tariff Act, 1975. The

same parity logic applied to S.C.A. No. 2233 of 2016 disposed of on

28.06.2019

(vi) The Division Bench of the High Court in 2019, being a co-ordinate

Bench, was bound either to follow the 2015 decision or, if it doubted its

correctness or applicability, ought to have referred the question to a larger

Bench. It could not have circumvented that discipline by artificially

narrowing down the earlier ruling. Its refusal to extend the 2015

declaration to the later period was therefore contrary to law.

(vii) Once it is held that the levy itself was without authority of law, the

State cannot retain the amount collected under such levy. Restitution is a

necessary incident of the finding of illegality.

32

CONCLUSION:

87. We declare that the levy of customs duty on electrical energy

cleared by the appellant from its SEZ unit to the DTA during the relevant

period, as sought to be enforced through Notification No. 25/2010-Cus.,

Notification No. 91/2010-Cus., Notification No. 26/2012-Cus., and

similar instruments, was without authority of law.

88. We accordingly hold that the impugned judgment of the High

Court dated 28 June 2019 cannot be sustained. In view of the foregoing

discussion, the appeal is allowed. The judgment and order dated 28 June

2019 of the High Court of Gujarat in Special Civil Application No. 2233

of 2016 is set aside.

RE: QUESTION V – WHAT DIRECTIONS ?

89. The respondents, namely the Union of India through the

concerned Ministry and the jurisdictional customs authorities, shall, after

due verification, refund to the appellant such amount that has been

deposited in cash or through encashment of security or otherwise under

protest by the appellant, towards customs duty on the clearance of

electrical energy from SEZ unit into the DTA for the period in question,

namely, 16 September 2010 to 15 February 2016. It is made clear that the

said refund shall not carry any interest.

90. The verification and refund exercise shall be undertaken and be

completed by the jurisdictional Commissioner of Customs within a period

of eight (8) weeks from the date of this judgment. The appellant shall

cooperate by furnishing the particulars of such deposits made if sought for

by the authorities for the aforesaid period. The authorities shall not raise

33

any hyper-technical objections so as to defeat the substance of this

direction.

91. It is further directed that no further demand shall be enforced

against the appellant in respect of customs duty on electrical energy

cleared from its SEZ unit to the DTA for the period covered in this appeal,

as the levy having been held unsustainable. For the avoidance of doubt,

we clarify that we express no opinion as to any future legislative regime

that Parliament may enact. Our findings are confined to the aforesaid

period and statutory framework arising in the present appeal.

92. In view of the directions issued above, we do not consider it

necessary to make any order as to costs and it is made easy. All pending

applications, stands disposed of.

.……………………………., J.

[ARAVIND KUMAR]

.……………………………., J.

[N.V. ANJARIA]

New Delhi;

January 05

th

, 2026.