Petitioner entitled to O&M benefits, restoration of guidelines upheld, duty-free transfer condition invalid.

The court held that the petitioner was entitled to O&M benefits during the disputed period as the restoration of the 2009 Guidelines did not affect their entitlement. The court also ruled that the condition prohibiting duty-free transfer of power to EOUs imposed by the Approval Committee was invalid. The petition was allowed, setting aside the condition to refund O&M benefits and the order upholding it for the period in question.

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Issues Involved:

1. Entitlement to O&M benefits for the period 01.04.2015 to 15.02.2016.
2. Condition prohibiting duty-free transfer of power to EOUs.

Detailed Analysis:

1. Entitlement to O&M Benefits for the Period 01.04.2015 to 15.02.2016:

The petitioner, a company engaged in electricity generation, sought approval for its power generating unit in the MBIL-SEZ under the 2009 Guidelines. The approval was granted via a Letter of Approval (LoA) dated 08.10.2009, which extended all facilities and entitlements as admissible to a unit in the SEZ for "Authorised Operations." The petitioner availed benefits under Section 26 of the SEZ Act, including O&M benefits, during the period from 08.10.2009 to 20.03.2012.

On 21.03.2012, the 2012 Guidelines were issued, superseding the 2009 Guidelines, but the petitioner continued to receive O&M benefits. The LoA was renewed until 08.10.2019. On 06.04.2015, the 2012 Guidelines were withdrawn, and the 2009 Guidelines were restored. Another letter on the same date indicated that power plants in processing areas would be demarcated as non-processing areas, and no O&M benefits would be available to such plants.

The petitioner contended that the operations carried out under the LoA were "authorised operations" and that the restoration of the 2009 Guidelines should not affect their entitlement to O&M benefits. The court found that the approval for the power plant in the processing area under the 2009 Guidelines remained valid and that the letter dated 06.04.2015 did not alter the "authorised operations" status. The court concluded that the petitioner was entitled to O&M benefits during the disputed period, as the direction to re-demarcate the power plant as a non-processing unit was not traceable to Section 26(2) of the SEZ Act.

2. Condition Prohibiting Duty-Free Transfer of Power to EOUs:

The petitioner argued that it was entitled to sell surplus power under Rule 47(3)(c) of the SEZ Rules and that the Approval Committee had no authority to demand duties on inputs consumed by an SEZ unit. Rule 47(3) allows the transfer of surplus power to the Domestic Tariff Area (DTA) on payment of duty on consumables and raw materials used for power generation. Clause (c) of Rule 47(3) specifies that the sale of surplus power to other units within the SEZ or to EOUs shall be without payment of duty.

The court noted that Rule 47(3) clearly permits duty-free transfer of surplus power to EOUs. The petitioner's contention that the condition imposed by the Approval Committee was contrary to the SEZ Act and Rules was upheld. The court found that the Approval Committee's condition prohibiting duty-free transfer of power to EOUs was invalid and set aside the impugned order upholding this condition.

Conclusion:

The court allowed the petition to the extent that the condition imposed by the Unit Approval Committee, requiring the petitioner to refund O&M benefits obtained during the period 01.04.2015 to 15.02.2016, was set aside. The impugned order upholding this condition was also set aside, and the petition was disposed of in these terms.

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