ADANI POWER LTD VS. UNION OF INDIA

Case Title: Adani Power Ltd Vs Union Of India

Citation: 2026 INSC 1

Court: Supreme Court

Bench: Justice Arvind Kumar, Justice N.V. Anjaria

Date of Judgment: January 5, 2026

Relevant Statutes/Key Provisions:

• Section 30 of the SEZ Act, 2005
• Section 12 and Section 25 of the Customs Act, 1962
• Article 265 of the Constitution of India.

Brief Facts:

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.

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.

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 Thus, prospectively from 16 February 2016, the levy itself was withdrawn insofar as the appellant was concerned.

Adani Power runs a power plant in the Mundra SEZ, Gujarat. The electricity generated there was partly used inside the SEZ and partly supplied to buyers in the Domestic Tariff Area (DTA). The Central Government imposed customs duty on electricity supplied from the SEZ to the DTA between 2010 and 2016. Earlier, in 2015, the Gujarat High Court had already ruled that such duty was illegal. Even then, the duty continued to be collected, and in 2019 the Gujarat High Court refused Adani Power’s refund claim. Adani Power approached the Supreme Court.

Issues:

1. Whether electricity generated within an SEZ qualifies as “goods” or an “import” when supplied to the DTA.
2. Whether customs duty can be levied on electrical energy cleared from an SEZ to the DTA in the absence of a clear charging provision.
3. Whether a prior declaration by the High Court that such a levy is ultra vires binds a subsequent co-ordinate bench regarding later notifications imposing the same levy.

Appellant’s Arguments:

The appellant submitted that the original levy was fundamentally un-authorized because electricity generated within an SEZ and supplied to the DTA did not constitute an “import” capable of attracting customs duty; therefore any levy premised on that fiction was void. It was emphasized that altering the rate (from 16% ad valorem to ten paise/unit and then three paise/unit) or recasting the levy as prospective could not cure the foundational defect: if the source of the charge is bad, every derivative notification that rests on the same invalid premise is equally tainted and void.

Counsel for the appellant argued that the 2016 writ petition was not a fresh, independent challenge but a sequel proceeding seeking implementation of the 2015 judicial declaration that the levy lacked authority and a refund of amounts paid under protest. Once a court has declared a levy ultra vires, the State cannot insist that the taxpayer must separately impugn each subsequent instrument that merely re‑expresses the same invalid principle; to require fresh challenges would elevate procedural form over substantive justice and force taxpayers into endless cycles of litigation to vindicate the same right.

The appellant stressed the constitutional doctrine of finality in adjudication: judicial pronouncements, once final, are binding commands of law and must be given practical effect. Allowing the executive to reintroduce an invalid levy in altered numerical form would frustrate the effect of the earlier judgment, undermine the rule of law, and deny the appellant consequential relief despite its prior victory. The appellant urged that courts must prevent executive re‑litigation of issues already decided and ensure that litigation comes to an end in the public interest.

On this basis the appellant sought a declaration that the subsequent notifications were also void insofar as they rested on the same ultra vires premise, and an order for refund of amounts paid under protest, arguing that such relief was necessary to give substance to the earlier judicial determination and to uphold Article 265’s requirement that taxes be levied only by authority of law.

Respondent’s Arguments:

The respondent (Union of India) argued that the later notifications (No. 91/2010‑Cus. at ten paise/unit and No. 26/2012‑Cus. at three paise/unit) were distinct, prospective fiscal measures enacted to recoup part of the customs‑duty benefit on duty‑free inputs when power was supplied into the DTA, and therefore could not be treated as mere reiterations of the earlier levy struck down in 2015; those notifications were not specifically challenged in the 2015 proceedings and were not formally impugned in the 2016 petition, so the High Court rightly declined to quash them or order refunds because a court cannot annul a statutory instrument or direct restitution on its basis unless that instrument is itself subjected to judicial review; further, Notification No. 9/2016‑Cus. (effective 16 Feb 2016) prospectively exempted power from large SEZ units like the appellant’s, substantially addressing the grievance going forward, leaving only a discrete monetary claim for an intervening period which required a direct, specific challenge to the notifications governing that period.

Judgment:

The Supreme Court ruled that no customs duty can be charged on electricity supplied from an SEZ to the DTA, criticized the High Court for ignoring earlier precedent, and ordered a refund of the duty collected for the period 2010–2016.

Ratio Decidendi:

No import without statutory basis: Where goods or services are produced domestically within Indian territory (here, electricity in an SEZ) and supplied to the DTA, such supply does not constitute an “import” under the Customs Act unless the statute expressly provides otherwise.

Taxation requires clear legislative authority: Article 265 mandates that taxes be levied only by authority of law; therefore, notifications or executive instruments cannot create a tax‑charging event absent statutory authorization.

Ultravires levies cannot be cured by iteration or rate alteration: A levy founded on an invalid legal premise remains invalid even if recast at lower rates or framed prospectively; derivative notifications resting on the same flawed source are equally tainted.

Final Decision:

he Supreme Court allowed the appeal of Adani Power Ltd., holding that electricity generated within the Mundra SEZ and supplied to the Domestic Tariff Area is not an “import”, and therefore the imposition of customs duty on such clearances lacked the requisite statutory charging authority and was ultra vires Article 265 of the Constitution; the impugned notifications insofar as they sought to treat SEZ, DTA power as importable goods were set aside and the appellant was entitled to consequential relief, including restitution for amounts paid under protest, subject to the Court’s directions and applicable procedural rules.

References:

1. Adani Power Ltd vs Union Of India on 5 January, 2026
2. Supreme Court Grants Relief To Adani Power, Holds Customs Duty Cannot Be Levied On Electricity Supplied From Special Economic Zone
3. Adani Power Ltd. & Anr vs. Union Of India & Ors. (2026) – JuryScan
4. Section 30 of the SEZ Act, 2005
5. Section 12 and Section 25 of the Customs Act, 1962
6. Article 265 of the Constitution of India.