Summary
The Supreme Court held that the Gujarat High Court's 2015 declaration that customs duty could not be levied on electricity cleared from the appellant's SEZ power plant to the Domestic Tariff Area was a declaration of law on the authority to levy, not confined to one notification or period. Later notifications imposing per-unit duty merely continued the same unauthorised levy, so the appellant was entitled to refund for 16.09.2010 to 15.02.2016 without separately challenging them.
Issues
- What the Gujarat High Court decided in its 2015 judgment and whether it was confined to Notification No. 25/2010-Cus. and the period up to 15.09.2010.
- Whether any change in law or fact between 16.09.2010 and 15.02.2016 justified a different result.
- Whether relief could be refused because Notification Nos. 91/2010-Cus. and 26/2012-Cus. were not specifically challenged.
- Whether a later co-ordinate Bench of the High Court could narrow the earlier declaration instead of following it or referring the question to a larger Bench.
Provisions considered
- Section 12, Customs Act, 1962Held to be the charging provision, levying duty on goods imported into or exported from India; electricity generated in an SEZ within India and wheeled to the DTA is not an import, so there was no lawful charging event. (¶¶ 40, 45, 59, 60, 61)
- Section 25, Customs Act, 1962The power to exempt goods from duty 'leviable thereon' presupposes an existing levy; using exemption notifications to create and quantify a duty on SEZ-to-DTA electricity was a colourable exercise of delegated power and ultra vires. (¶¶ 43, 46, 53, 54, 55, 56, 57, 65)
- Section 30, Special Economic Zones Act, 2005Read as a parity clause making SEZ-to-DTA clearances bear the duty leviable on like goods when imported; since imported electricity bore nil duty, SEZ electricity could not be singled out for duty, and the deeming fiction could not be extended to create a new levy. (¶¶ 41, 60, 61, 62, 63, 65)
- Rule 47(3), Special Economic Zones Rules, 2006Since the rule already requires payment of duty on consumables and raw materials used for power transferred to the DTA, an additional duty on the electricity itself amounted to double counting; the Union's justification that the per-unit duty recouped input benefits was rejected. (¶¶ 8, 42, 48, 64)
- Articles 14 and 265, Constitution of IndiaTaxing SEZ electricity while imported electricity bore no duty violated Article 14, and imposing a levy without a charging provision enacted by Parliament violated Article 265. (¶¶ 47, 63, 65)
- Articles 136 and 226, Constitution of IndiaThese jurisdictions carry ample power to mould relief so that a levy declared unlawful is not continued in another form through successor notifications. (¶ 71)
Held
- The ratio of the 2015 judgment consisted of four propositions: no lawful charging event exists for SEZ-to-DTA electricity; an exemption notification cannot create a duty Parliament has not imposed; retrospective demand without statutory sanction violates Article 265; and the levy imposed an arbitrary double burden. It was therefore a structural declaration on the authority to levy, governing all periods on the same legal footing. (¶¶ 49, 50, 51)
- A tax requires a clear charging provision, an identifiable taxable event and a statutory rate mechanism; exemption notifications may only relax a levy and cannot supply a missing charge. Delegated fiscal legislation is reviewable for purpose, and a power to exempt cannot be inverted into a power to tax. (¶¶ 55, 56, 57, 59)
- Where the root of a levy is ultra vires, later notifications imposing duty on the same taxable fiction are not saved by lowering the rate or making them prospective; there was no change in Section 30, the nil tariff on imported electricity or Articles 14 and 265 between 2010 and 2016. (¶¶ 58, 65, 72)
- Where a levy has been declared without authority of law, a later petition to enforce that declaration and obtain consequential relief is a sequel, not a fresh challenge; successor notifications without a new statutory basis create no new cause of action, and a constitutional court may grant relief without requiring each to be separately struck down. (¶¶ 68, 69, 70, 71, 73, 74)
- A co-ordinate Bench of a High Court is bound by a question of law settled by an earlier Bench of equal strength; if it doubts that view it must refer the matter to a larger Bench and cannot artificially narrow the earlier ruling. The 2019 Bench erred in confining the 2015 judgment. (¶¶ 77, 78, 79, 80)
- Once a levy is finally declared ultra vires, the executive must conform its conduct to that declaration and cannot continue the levy through altered instruments and then resist restitution on technical grounds; the State cannot retain amounts collected under a levy without authority of law. (¶¶ 82, 83, 84, 86)
Result
Appeal allowed; High Court's judgment of 28.06.2019 set aside; levy on the appellant's SEZ-to-DTA electricity under Notification Nos. 25/2010, 91/2010 and 26/2012-Cus. declared without authority of law; amounts deposited under protest for 16.09.2010 to 15.02.2016 to be refunded without interest after verification within eight weeks; no further demand for that period; no opinion on any future legislative regime; no costs.