Supreme Court sets aside customs duty on Adani Power over electricity removed from Gujarat SEZ

In a significant order, the Supreme Court has set aside the customs duty levied on r Adani Power Ltd, for electricity supplied from a Special Economic Zone (SEZ) to the domestic market.

A bench of Justices Aravind Kumar and NV Anjaria has set aside a 2019 Gujarat High Court judgment and granted relief to the company from the levy on power generated at its Mundra plant.

Customs authorities has been directed to refund the duty collected from Adani Power, asking the jurisdictional Commissioner of Customs to complete verification and issue refunds within eight weeks from the date of the judgment.

Adani Power operates a coal-based thermal power plant within the Mundra Special Economic Zone in Gujarat’s Kutch district, near Mundra Port. The plant has an installed capacity of 4,620 MW and supplies electricity under long-term power purchase agreements to distribution companies in Gujarat and Haryana, as well as to the utility serving the Mundra SEZ.

In 2010, the Government levied custody duty with retrospective effect from 26.6.2009, which the Gujarat High Court in 2015 held to be arbitrary and illegal. It held that Adani was exempted from the levy of customs duty for the period 26.6.2009 to 15.9. 2019 as the levy of customs duty on electrical energy can only be levied prospectively through a substantive law. The High Court also stated that it amounted to double taxation. Later, the authorities imposed custody duty for a period onwards which Adani challenged. The High Court in 2019 denied the relief, stating that they had not challenged the subsequent notification imposing the duty. High court had said a wider exemption could give Adani Power an unfair advantage and held that duty exemptions for imported electricity could not automatically apply to power generated in an Indian SEZ.

The Supreme Court in its judgment said today, "The Gujarat High Court in 2015, as a matter of law, declared that customs duty could not be limited on electrical energy cleared from the applicant's SEZ unit to DTA, i.e., domestic traffic area. 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 Article 14 and Article 265, is squarely applicable to the judgment and order dated 28.06. 2019. That declaration was not confined in principle to notification of 25 of 2010 or to the period ending 15 September 2010. It went to the authority to limit customs duty on SEZ to DTA, electricity clearances in the statutory setting, then obtained....The subsequent notifications, namely 91 of 2010 prescribing 10 paisa per unit and notification 26 of 2010 prescribing 3 paisa per unit, did not create a new levy or a new footing. They merely continued the same levy in altered form; the change in arithmetical rate by prospective character does not include the lack of authority in principle. 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."

Case Title: Adani Power vs. Union of India

Bench: Justices Kumar and Anjaria

Judgment Date: January 5, 2026