2025 (8) TMI 1084 - SC - Customs

Press release not 'law' under PPA; DGFT notifications only qualify; Para 8.3 denies deemed-export benefits; Article 13 not triggered

NABHA POWER LIMITED Versus PUNJAB STATE POWER CORPORATION LIMITED AND OTHERS

SC dismissed the appeals. Applying the Nabha Power precedent, the Court held that the press release did not constitute 'law' under the PPA and only the ... Availability of deemed export benefits under Para 8.3 of Foreign Trade Policy 2009-2014 (FTP) - bid cut-off date - would notifications by Directorate General of Foreign Trade (DGFT) amounts to “Change in Law” under the Power Purchase Agreement dated 18.01.2010 (PPA) or not - Press Release of Cabinet Decision pertaining to change of threshold of so-deemed export benefits would constitute a “Change in Law” under the PPA or not - entitlement to restitutionary relief in the form of compensation. Entitlement of the Appellants for the deemed export benefits under the FTP - HELD THAT:- The decision of 3-Judge Bench in Nabha Power Limited [2024 (11) TMI 216 - SUPREME COURT (LB)] squarely covers the field of law in relation to the issue of determination of “Change in Law” in the instant case and same is answered accordingly, holding that the Press Release dated 01.10.2009 would neither amount to “law” within the meaning conceptualized in the PPA, as it would only be the Notifications dated 11.12.2009 and 14.12.2009 that would have amounted to “law”, nor it would thereby amount to “Change in Law” as argued by Appellants in the instant Civil Appeals. The instant case would fall foul of the essentiality when Para 9.36 of the FTP requires that the manufactured good should have been brought into existence with a distinctive name, character, or use. Such a feasibility would be impossible when it comes to the concerned power plants in the instant set of Appeals. The essence of deemed export benefits lay in the supply of goods to power projects, not in power procurement arrangements. A collective and comprehensive reading of Para 8.2, Para 8.4.4(iv) and Para 8.6 of the FTP establishes that the Independent Power Producer stage is in reference to the main contractor vis-à-vis supply of goods to the concerned project, while the Engineering Procurement Contract stage concerns the supply by a sub-contractor to the Engineering Procurement Contract contractor. Undoubtedly, and admittedly, mandate of ICB may be claimed, on behalf of the Appellants, to have been followed during their bidding process leading to the PPAs, but no evidence has been produced on record by the Appellants to determine whether such a mandate i.e. ICB process was adopted by them for procurement of goods concerned and/or to be supplied as per Para 8.4.4(iv) of the FTP, which mandates ICB either at the stage of Independent Power Producer or Engineering Procurement Contract when in relation to a “supply of goods” as per Para 8.2(g) of the FTP. Reliance on Tariff- Based Competitive Bidding by the Appellants for selection of the power project developer cannot be equated with the mandate of the ICB for supply of goods and is, therefore, a misnomer and a misplaced plea raised on their part. The Appellants, have clearly failed to establish the procurement of “supply of goods” as per the mandate of ICB either at the stage of Independent Power Producer or Engineering Procurement Contract, owing to the fact that such procurement of the components was done through directly entering into contract(s) with their subsidiaries or joint venture or related companies, we do not find any reason to further deal with the contentions raised by the Appellants vis-à-vis other prerequisites as all the essential pre-conditions unless ticked would not render them eligible for the benefit claimed. The instant issue is answered against the Appellants to the effect that they were not entitled to the deemed export benefits under Para 8.3 of the FTP. Alleged withdrawal of the said benefits through notifications of the DGFT dated 28.12.2011 and 21.03.2012 collectively - “Change in Law” as per Article 13 of the PPA or not - HELD THAT:- As a matter of fact, no interpretation of law was undertaken prior to the cut-off date to the effect that a developer shall be able to import goods to be assembled into a power plant and also claim the deemed export benefits on those. Therefore, APTEL, while dealing with the said issue in detail, and correctly so, concluded that the aforesaid contended circulars to be merely clarificatory and not as something which has either changed or introduced something new, being allegedly oppressive towards the Appellants - Hypothetically, even assuming the case of the Appellants to the said effect to be good in law and that notification(s) would indeed amount to a “Change in Law”, it is merely an academic exercise without any impact on the legal position of the Appellants. They were, and still are not, entitled to any deemed export benefits under the FTP for their inability to fulfil the concerned prerequisites. Whether Appellants are entitled to restitutionary relief in the form of compensation? - HELD THAT:- The Appellants have not been able to establish those in their favour and accordingly, there cannot arise any question for compensation to the Appellants by the PSPCL as a means of restitutionary relief. The Appellants have failed to impress this Court with their submissions in these Civil Appeals and there are no ground to interfere with the Impugned Judgment and order dated 04.07.2017 passed by the Appellate Tribunal for Electricity, New Delhi - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether deemed export benefits under Para 8.3 of the Foreign Trade Policy 2009-2014 (FTP) were legitimately available to the appellants as of the bid cut-off date. 2. Whether notifications, circulars or a Press Release (Cabinet decision) and subsequent DGFT public notices clarifying or withdrawing deemed export benefits constitute a 'Change in Law' under Article 13 of the Power Purchase Agreement (PPA). 3. If a Change in Law is found, whether the appellants are entitled to restitutionary relief/compensation under Article 13 of the PPA. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Availability of deemed export benefits under Para 8.3 FTP as on bid cut-off date Legal framework: Para 8.1-8.6 and relevant definitions (e.g., 'capital goods', 'manufacture') of the FTP; requirement that deemed export benefits apply only to 'goods' manufactured in India and supplied under the procedure of International Competitive Bidding (ICB) or specified alternatives in FTP; related definitions and tests from central statutes and authorities for 'goods' and 'manufacture'. Precedent treatment: The Court relied on established authorities interpreting 'goods', 'manufacture' and excisable/marketable products, which require movability, marketability and transformation into a new product with distinctive name/character/use; authorities distinguish construction/immovable projects from manufacture of goods. Interpretation and reasoning: The Court identified five essential prerequisites under FTP for deemed export benefits: (i) transaction must concern 'goods' (movable, marketable); (ii) goods must be 'manufactured in India'; (iii) there must be an act of 'supply of goods' to the project; (iv) supply must be by main or sub-contractor to the project; and (v) supply must comply with ICB procedural requirements (subject to limited MPP exemptions). Applying those prerequisites to the facts, the Court held that a coal-based thermal generating station assembled in-situ is an integrated immovable asset that cannot, as a whole, satisfy the 'goods' or 'manufacture' tests. Severing components to treat them as distinct manufactured goods was inconsistent with the FTP scheme and marketability/manufacture jurisprudence. The Court also found absence of evidence that procurement of components complied with FTP's ICB requirements at the stage required for deemed export relief (IPP or EPC stage) and noted that reliance on tariff-based competitive bidding for developer selection did not equate to the FTP's ICB mandate for supplies. Ratio versus obiter: Ratio - the ruling that deemed export benefits under Para 8.3 FTP require fulfillment of the enumerated five prerequisites and that an in-situ thermal power plant does not qualify as 'goods' or a manufactured product for FTP purposes (and that the appellants failed to prove satisfaction of ICB procurement requirements). Obiter - subsidiary remarks on alternative arguments not necessary to the core holding (e.g., comparative treatment of other projects) are incidental. Conclusion: The appellants were not entitled to deemed export benefits under Para 8.3 of the FTP as on the bid cut-off date; the essential preconditions were not satisfied. Issue 2 - Whether Press Release, DGFT circulars or public notices amounted to 'Change in Law' under Article 13 of the PPA Legal framework: Article 13 of the PPA defines 'Change in Law' to include enactment, adoption, promulgation, amendment or repeal of any law after a stipulated date, or a change in interpretation by a competent court/tribunal/Indian governmental instrumentality; Article 13 sets notification, proof, and quantification requirements and prescribes contractual remedies and temporal effect of adjustments. Precedent treatment: The Court applied principles of contractual interpretation (ordinary meaning, no departure to avoid absurdity), and prior decisions requiring law to be duly promulgated/published (gazette notifications, statutory/regulatory instruments) to constitute 'law'. Press releases or policy communications lacking binding legal force have been held not to be 'law' for contractual change-of-law clauses. Interpretation and reasoning: The Court held that Article 13's language contemplates statutes, subordinate legislation and binding promulgations; therefore, a Press Release (policy statement) is not a binding 'order' or legislative instrument that can constitute 'Change in Law'. Notifications that effect statutory or regulatory change must be duly promulgated to take effect. The Court treated DGFT public notices and circulars of April/December 2011 as clarificatory/administrative in nature; even if regarded as changes, they do not alter the outcome because appellants were ineligible on substantive FTP prerequisites. The Court also observed procedural obligations under Article 13 (timely notice and quantification) were not satisfied by the appellants in any event. Ratio versus obiter: Ratio - Press Releases and non-promulgated policy communications do not constitute 'law' under Article 13; only duly promulgated notifications/statutory instruments can trigger Change in Law relief. Obiter - comments on characterisation of specific DGFT circulars as merely clarificatory where not necessary to the final disposal, and observations on legitimacy of legitimate expectation claims vis-à-vis government press communications. Conclusion: The Press Release did not amount to Change in Law under the PPA; the DGFT/public notices were at most clarificatory and-critically-do not alter the legal conclusion that appellants lacked entitlement to FTP benefits; furthermore appellants failed to comply with Article 13 procedural prerequisites. Issue 3 - Entitlement to restitutionary relief/compensation under Article 13 of the PPA Legal framework: Article 13 prescribes restoration to the economic position as if the Change in Law had not occurred, subject to materiality thresholds, proof of impact, timing rules, notification obligations, and modes of calculating tariff adjustments during construction and operation. Precedent treatment: Contractual principle that compensation under a Change in Law clause requires a demonstrable, quantified, and material increase in cost/reduction in revenue causally linked to a qualifying Change in Law and compliance with contractual notice/quantification procedures. Interpretation and reasoning: Because the Court concluded that the appellants were not entitled to FTP benefits as on the cut-off date, and because (i) the Press Release/public notices did not amount to Change in Law for contractual relief, and (ii) the appellants failed to comply with Article 13's procedural and evidentiary preconditions (timely notice, binding recognition of entitlement, and non-speculative quantification of loss), there is no basis for restitutionary compensation. The Court further noted that, even hypothetically treating DGFT notifications as Change in Law, appellants' substantive ineligibility would negate any entitlement to relief. Ratio versus obiter: Ratio - absence of a qualifying Change in Law and failure to satisfy Article 13 conditions preclude restitutionary relief; consequently, no compensation is payable. Obiter - discussion of hypothetical consequences if a valid Change in Law were otherwise established is academic given the primary holdings. Conclusion: Appellants are not entitled to restitutionary relief or compensation under Article 13; claims dismissed for lack of merit. Cross-references and procedural findings The Court affirmed the allocated burdens: a bidder claiming contractual relief must establish entitlement as of the cut-off date, prove that the subsequent instrument qualifies as law under the PPA, and comply with Article 13 notice and quantification requirements. The Court upheld the appellate and regulatory findings that the substantive prerequisites under FTP were not satisfied and that the impugned administrative instruments do not, in themselves, generate contractual Change in Law relief.