Customs duty on electricity sent from SEZ to domestic buyers struck down for lack of "import" u/s12

Customs duty demanded on electrical energy transmitted from an SEZ to the DTA was held ultra vires as the statutory charging event under s.12 Customs Act-"import into India"-did not exist in substance, and delegated "exemption" power could not be inverted to create a levy; the levy therefore lacked authority under Arts. 14 and 265, and later rate/format changes did not cure the foundational defect, so the demand was unsustainable. The HC's refusal of relief for want of a specific challenge to subsequent notifications was erroneous because, absent any new statutory basis, such instruments did not generate a fresh cause of action, and effective relief could follow enforcement of the prior declaration; the appeal was allowed and the impugned HC judgment set aside.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the prior binding declaration that customs duty could not be levied on electrical energy cleared from a Special Economic Zone to the Domestic Tariff Area was limited to a particular notification/period or applied in principle to subsequent periods on the same statutory footing.

2. Whether, during the later period under consideration, any material change in law or relevant facts justified a different outcome from the prior declaration, despite later notifications prescribing different (specific) rates.

3. Whether relief (including refund) could be denied solely because later notifications were not separately and specifically challenged, when the petition sought enforcement of an earlier declaration that the levy lacked authority of law.

4. Whether a co-ordinate Bench could refuse to apply the earlier binding decision by confining it to an earlier notification/period, without referring the matter to a larger Bench.

5. What consequential directions were required once the levy was held to be without authority of law (refund, restraint on further demands, and conditions such as interest and timeline).

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Scope and effect of the earlier declaration striking down the levy

Legal framework: The Court examined the charging basis under Section 12 of the Customs Act, the parity/deeming clause in Section 30 of the Special Economic Zones Act, and the limits of delegated power under Section 25 of the Customs Act, along with constitutional constraints under Articles 14 and 265, as applied in the earlier decision.

Interpretation and reasoning: The Court held that the earlier decision was not a notification-specific or time-bound indulgence. It rested on four foundational determinations: absence of a lawful taxable event for "import into India" in such SEZ-to-DTA electricity clearances; impermissible use of an "exemption" notification to create a levy; impermissibility of retrospectively fastening the levy through delegated action; and arbitrariness/double burden given the existing mechanism for neutralising duty benefits on inputs. These determinations formed the ratio decidendi and, absent change in the statutory setting, governed later periods as well.

Conclusion: The earlier declaration was a principle-based exposition that, on the then-existing framework, customs duty could not be levied on electrical energy transmitted from an SEZ to the DTA; it therefore applied to subsequent periods standing on the same legal footing.

Issue 2: Whether later notifications/rates and the later period rested on a materially changed legal or factual basis

Legal framework: The Court applied the requirements of a valid fiscal levy: a clear charging provision, an identifiable taxable event, and statutory rate-making authority; and it construed Section 30 of the SEZ Act as a parity clause rather than an expansion of the customs charging event. It also considered Rule 47(3) of the SEZ Rules as already providing for neutralisation of duty benefits on inputs when power is supplied to the DTA.

Interpretation and reasoning: The Court found no material change in law or relevant facts during the later period: Section 30 remained unchanged; imported electrical energy continued at a nil customs duty rate; and constitutional parameters remained constant. Later notifications merely altered the form/rate (from ad valorem to per-unit) and operated prospectively, but did not cure the basic defect-absence of authority to levy customs duty on such clearances. The "recoupment of duty-free input benefits" rationale was rejected because Rule 47(3) already neutralised input duty benefits; imposing a further duty on the electricity output amounted to double counting and unfairness. The Court reaffirmed that Section 25 is a power to exempt from duty otherwise leviable, not a power to create a levy; therefore, changing the rate/structure did not validate an unauthorised tax.

Conclusion: No statutory or factual change justified departure; the later-period levy under subsequent notifications remained without sanction in law.

Issue 3: Necessity of separately challenging later notifications to obtain relief/refund

Legal framework: The Court relied on the remedial nature of constitutional jurisdiction and administrative law principles that when the foundation of a levy is declared ultra vires, derivative continuations of the same levy cannot be sustained absent a materially new statutory basis.

Interpretation and reasoning: The Court characterised the later petition as a sequel seeking enforcement of the earlier binding declaration and restitution of amounts paid under protest. It rejected the contention that the absence of a fresh, specific challenge to each later notification barred relief, holding that constitutional adjudication must look to substance over form; otherwise, the State could perpetuate an invalid levy by reissuing it through successive notifications and force repetitive litigation. Since the commodity, movement (SEZ to DTA), asserted source of power, and foundational defect remained the same, the notifications did not create a new cause requiring fresh adjudication of the same illegality.

Conclusion: Relief and refund could be granted without requiring separate challenges to each later notification continuing the same unauthorised levy.

Issue 4: Binding effect of the earlier decision on a co-ordinate Bench

Legal framework: The Court applied the doctrine of judicial discipline and stare decisis: a co-ordinate Bench is bound by an earlier co-ordinate Bench decision on the same question of law and, if doubting correctness/applicability, must refer the matter to a larger Bench rather than narrowing or bypassing it.

Interpretation and reasoning: The Court held that the later Bench impermissibly confined the earlier ruling to an earlier notification/period to deny relief, without undertaking a permissible course of referral. Given finality of the earlier declaration and absence of change in the governing legal framework, the co-ordinate Bench was duty-bound to apply the earlier ratio.

Conclusion: The refusal to apply the earlier binding declaration and the artificial narrowing of its effect was contrary to judicial discipline; the later decision was vitiated.

Issue 5: Consequential directions on refund and restraint once levy held unauthorised

Legal framework: The Court applied the principle that amounts collected under a levy held without authority of law cannot be retained, and restitution follows from the finding of illegality.

Interpretation and reasoning: Having declared the levy without authority of law for the relevant period, the Court directed refund after verification, set a strict timeline for completion by the competent customs authority, required cooperation in furnishing particulars, and prohibited "hyper-technical objections" defeating the substance of relief. The Court expressly denied interest on the refund and restrained enforcement of any further demand for the covered period, while clarifying it expressed no opinion on any future legislative regime.

Conclusion: Refund of amounts deposited under protest for the specified period was ordered without interest, to be completed within eight weeks after verification; no further demand for that period could be enforced.

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