2025 (8) TMI 1084 - SCH - Customs

Deemed export benefits denied under Para 8.3 of FTP; press release not law for PPA; DGFT notifications govern

NABHA POWER LIMITED Versus PUNJAB STATE POWER CORPORATION LIMITED AND OTHERS

NABHA POWER LIMITED Versus PUNJAB STATE POWER CORPORATION LIMITED AND OTHERS - 2025 INSC 1002 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.