Supreme Court Exempts Adani Power from Customs Duty on Electricity Supplied from Gujarat SEZ
Apex court overturns Gujarat High Court ruling, says levy lacked legal authority
Decision brings financial relief to Adani Power and clarity for SEZ-based power producers
By Our Legal Reporter
New Delhi: January 06, 2026:
In a landmark judgment, the Supreme Court of India has allowed Adani Power Limited exemption from customs duty on electricity supplied from its Mundra Special Economic Zone (SEZ) to the Domestic Tariff Area (DTA). The ruling, delivered on January 5, 2026, ends a prolonged legal battle over whether electricity generated in an SEZ and sold domestically should attract customs duty.
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The apex court’s decision overturns a 2019 Gujarat High Court ruling that had denied Adani Power relief, and it directs customs authorities to refund duty collected, thereby resolving a dispute that has persisted for over 15 years.
Background of the Dispute
- Adani Power’s Mundra Plant: A coal-based thermal power plant located at Mundra Port, Gujarat, operating within an SEZ.
- Government Levy: In 2010, the Centre imposed customs duty on electrical energy with retrospective effect from June 26, 2009.
- Legal Challenge: Adani Power challenged the levy, arguing that electricity is not a “good” that can attract customs duty.
- Gujarat High Court Ruling (2019): The High Court upheld the levy, denying exemption to Adani Power.
- Supreme Court Appeal: Adani Power appealed, leading to the present ruling in its favour.
Supreme Court’s Reasoning
The bench comprising Justices Aravind Kumar and Prasanna B. Varale held:
- No Authority of Law: Customs duty on electricity lacked statutory backing.
- Invalid Levy: The government cannot retain amounts collected under an invalid tax.
- Refund Ordered: Customs authorities must refund duty collected from Adani Power.
- Prospective Application Only: Any levy on electricity must be imposed prospectively through proper legislation, not retrospectively.
Impact of the Ruling
- Financial Relief for Adani Power: The company will receive refunds for duty paid over several years.
- Clarity for SEZ Power Producers: The judgment sets a precedent that electricity supplied from SEZs to domestic markets cannot attract customs duty.
- Boost to SEZ Policy: Reinforces the principle that SEZs are meant to encourage production and exports, not burden producers with retrospective levies.
- Investor Confidence: The ruling may improve investor sentiment in the power sector, particularly for SEZ-based projects.
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Industry and Expert Reactions
- Corporate Analysts: Call the ruling a “game-changer” for SEZ-based power producers.
- Legal Experts: Highlight that the judgment strengthens the principle of “no taxation without authority of law.”
- Policy Commentators: Note that the decision aligns with India’s broader push for ease of doing business and regulatory certainty.
Broader Implications
- For Consumers: While the ruling directly benefits Adani Power, it may indirectly help stabilize electricity tariffs by reducing cost burdens.
- For Government: The judgment underscores the need for clear legislative backing before imposing levies.
- For SEZs: Reinforces the attractiveness of SEZs as hubs for industrial activity without unexpected tax liabilities.
Conclusion
The Supreme Court’s ruling in favour of Adani Power marks a significant moment in India’s energy and legal landscape. By exempting electricity supplied from SEZs to domestic markets from customs duty, the court has not only provided relief to Adani Power but also set a precedent that strengthens investor confidence and regulatory clarity.
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This decision highlights the judiciary’s role in ensuring that taxation is grounded in law and fairness, and it is expected to have lasting implications for SEZ-based industries across India.
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