TaxTMI 
TaxTMI 
2025 (8) TMI 1084
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....s as of the bid cut-off date and would notifications by Directorate General of Foreign Trade (hereinafter, "DGFT") amount to "Change in Law" under the Power Purchase Agreement dated 18.01.2010 (hereinafter, "PPA"); (ii) Whether the Press Release of Cabinet Decision pertaining to change of threshold of so-deemed export benefits would constitute a "Change in Law" under the PPA; and (iii) If so, whether Appellants are entitled to restitutionary relief in the form of compensation. 2. The Civil Appeal No. 8694 of 2017 as filed by the Nabha Power Limited (hereinafter, "NPL") under Section 125 of the Electricity Act, 2003 (hereinafter, "EA 2003"), arises from the Common Judgment dated 04.07.2017 (hereinafter, "Impugned Judgment") in Appeal No. 47 of 2015 passed by the Appellate Tribunal for Electricity, New Delhi (hereinafter, "APTEL") owing to rejection of the claim(s) moved by the NPL for relief under Article 13 of the PPA executed by it with the Punjab State Power Corporation Limited (hereinafter "PSPCL"), and primarily the challenge to the post-bid withdrawal of fiscal incentives which were allegedly available earlier under the FTP and their classification as a "C....
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....ower Project to 500 Mega Watt from 1,000 Mega Watt for single location projects under the Mega Power Policy, 2006 (hereinafter, "MPP 2006"). On the same date, there was a press release by the Press Information Bureau that the Union Cabinet has taken a decision that it is not mandatory for an inter-state sale of power from a project to be eligible under the MPP 2006 (hereinafter, "Press Release dated 01.10.2009"). 8. This Decision dated 01.10.2009 led to two changes: (i) Amendment of the existing eligibility criteria of being a MPP as set out under Entry 400 of the Principal Customs Notification No. 21 of 2002 dated 01.03.2002 by the Department of Revenue, Ministry of Finance, Government of India through its powers under Section 25 of the Customs Act, 1962 (hereinafter, "CA 1962"); (ii) Issuance of Memorandum No. A-118/2003-IPC modifying the MPP (hereinafter, "MPP 2009"). 9. It is pertinent to note that it was only through Notifications Nos. 91/2009-Cus dated 11.12.2009 and 92/2009-Cus dated 14.12.2009 that the aforesaid benefits were brought into effect. 10. In pursuance of the same, NPL sought grant of status as a Mega Power Project from Ministry of Powe....
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....Commission for reconsideration of the issue on the FTP. It directed the State Commission to also ascertain and opine as to whether the benefits under the FTP were available to the NPL as on the cut-off date. 16. On remand, the State Commission vide its majority opinion culminating in its Order dated 16.12.2014 (hereinafter, "Second Order of Commission") in Petition No. 30 of 2012 reiterated its earlier conclusions, observing that the benefits of the FTP were neither available to NPL as on the cut-off date nor their withdrawal attract the consequences of "Change in Law". It further went on to observe that NPL had not produced contemporaneous DGFT endorsements to substantiate its eligibility to claim FTP benefits under Para 8.3. Not only that, but as per their own Affidavit dated 23.05.2011, NPL was to mandatorily pass on the benefits accrued under the MPP 2009 to the PSPCL. 17. Aggrieved from the reaffirmation of the findings by the State Commission in Second Order of Commission, the NPL again moved APTEL in Appeal No. 47 of 2015. It asserted that at the time of bidding, deemed export benefits were not only in force but also factored into the financial modelling and tariff com....
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....me of the statute, requiring the final product shipped or deemed to be shipped to a buyer outside the jurisdiction of India. Observing that the NPL's reliance on Para 8.3 was based on misconstrued interpretation of the letter as well as the spirit of the regime, it held that said fiscal incentives were inherently inapplicable to an in-situ coal-based thermal power plant. 20. To examine whether the Public Notices dated 27.04.2011 and 28.04.2011 constituted a "Change in Law" under Article 13 of the PPA, APTEL while perusing the language of Article 13 clarified that Article 13.1.1(ii) extended to "any change in law" affecting "taxes, duties, cesses, levies, fees and charges" which altered the cost to the seller of performing its obligations. The NPL had contended that withdrawal of deemed export benefits, though effected by said Public Notices rather than a parliamentary enactment, was indisputably a change in the law or law-making process, and that the resulting increase in capital cost which engaged the "Change in Law" provision was rejected by APTEL observing that the said clause had only envisioned a legislation and/or a statutory enactment in form of a regulation by a competen....
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....or benefits. Moreover, the Public Notice dated 27.04.2011 and 28.04.2011, issued pursuant to powers under the FTP Act 1992, are thus argued to be legislative in character and binding, triggering contractual relief. 25. Additionally, NPL avers that Impugned Judgment overlooked its legitimate expectation, cultivated by DGFT practice and minutes of the PIC Meeting dated 15.03.2011, that deemed export benefits under Para 8.3 of the FTP would subsist until formally rescinded. By refusing to quantify loss on the basis of contemporaneous tariff models and the record of actual procurement, the State Commission is also said to have abdicated its duty to enforce the economic equilibrium principle fundamental to Article 13. It also faults the APTEL's finding on procedural non-compliance, pointing out that timely notice was given and that the quantification of incremental costs, derived from pre-bid financial schedules, was neither speculative nor premature. 26. Also, adopting their contentions before the State Commission and APTEL, NPL has put forth that while formulating its bid, it had factored in two critical streams of fiscal incentives available under distinct schemes: (i) the Mega....
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....he FTP. 29. On the "Change in Law" issue, PSPCL argues that only statutory enactments or delegated legislation under the FTP Act 1992 qualify, and that administrative notices, lacking the force of regulation, cannot be contractual triggers. Finally, PSPCL submits that NPL's cost-impact calculations are hypothetical, relying on benefit rates that were never certified by DGFT, and that benefits, if any, must be sought through statutory appeals rather than by recourse to the PPA's "Change in Law" clause. 30. In its Rejoinder dated 15.11.2017, NPL insists that the Counter Affidavit dated 12.09.2017 misconceives both the factual matrix and the legal contours of the "Change in Law" provision. It reiterates that the statutory framework of the FTP contemplates deemed export treatment for capital goods supplied under ICB, irrespective of physical export, and that numerous circulars by DGFT and meetings of PIC had long signalled such availability. The Rejoinder emphasizes that the PIC meeting dated 15.03.2011 and the Public Notices dated 27.04.2011 and 28.04.2011 are legislative in character, having been issued under rule-making powers conferred by the Parliament, and thus squarely fal....
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....t Court of law, tribunal or Indian Governmental Instrumentality provided such Court of law, tribunal or Indian Governmental Instrumentality is final authority under law for such interpretation or (iii) change in any consents, approvals or licenses available or obtained for the Project, otherwise than for default of the Seller, which results in any change in any cost of or revenue from the business of selling electricity by the Seller to the Procurer under the terms of this Agreement or (iv) any change in the (a) Declared Price of Land for the Project or (b) the cost of implementation of the resettlement and rehabilitation package of the land for the Project mentioned in the RfP or (c) the cost of implementing Environmental Management Plan for the Power Station (d) Deleted but shall not include (i) any change in any withholding tax on income or dividends distributed to the shareholders of the Seller, or (ii) change in respect of UI Charges or frequency intervals by an Appropriate Commission. 13.1.2 'Competent Court' means: The Supreme Court or any High Court or any tribunal or any similar judicial or quasi-judicial body in India that has jurisdiction to adjudicate ....
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....f the same or should reasonably have known of the Change in Law. 13.3.2 Notwithstanding Article 13.3.1, the Seller shall be obliged to serve a notice to the Procurer under this Article 13.3.2 if it is beneficially affected by a Change in Law. Without prejudice to the factor of materiality or other provisions contained in this Agreement, the obligation to inform the Procurer contained herein shall be material. Provided that in case the Seller has not provided such notice, the Procurer shall have the right to issue such notice to the Seller. 13.3.3 Any notice served pursuant to this Article 13.3.2 shall provide, amongst other things, precise details of: (a) the Change in Law; and (b) the effects on the Seller of the matters referred to in Article 13.2. 13.4 Tariff Adjustment Payment on account of Change in Law 13.4.1 Subject to Article 13.2, the adjustment in Monthly Tariff Payment shall be effective from: (i) the date of adoption, promulgation, amendment re-enactment or repeal of the Law or Change in Law; or (ii) the date of order/judgment of the Competent Court or tribunal or Indian Governmental Instrumentality....
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....om the concerned duties as on the cut- off would be instances of other similarly placed project where goods were also treated to be exempt under the instant FTP. 39. On the other hand, the Respondents had relied on decision of this Court in GMR Warora Energy Limited v. Central Electricity Regulatory Commission (CERC) and Others (2023) 10 SCC 401 to substantiate their claim for "Change in Law" through withdrawal of deemed export benefits through circulars of Ministry of Commerce and Industry as well as the Notification dated 28.12.2011. This contention is also rebutted by the Appellants claiming that the same is not applicable in the present case for having a varied factual matrix. 40. Whether the Press Release of Cabinet Decision pertaining to change of threshold of so-deemed export benefits constitutes a "Change in Law" under the PPA, an issue-at-hand, has been substantively dealt as part of decision of this Court in Nabha Power Limited and Another v. Punjab State Power Corporation Limited and Another (2025) 5 SCC 353 wherein the question before this Court, arising from the same PPA and an equivalent dispute, was the juxtaposition of the MPP and the Press Release dated 01.10....
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....was PSPCL in the said case, to have notified in case the "Change in Law" when it is beneficial to it. The Bench also rejected the claims of the Appellant therein that the sub-clauses pertaining to changes in interpretation, licenses, land prices or rehabilitation costs are not applicable in the present case. Furthermore, placing reliance on Babu Verghese and Others v. Bar Council of Kerala and Others (1999) 3 SCC 422 as well as Section 21 of the General Clauses Act, 1897, it held that CA 1962 required the concerned notification to have been issued in a certain manner and be duly published in the official gazette, and reiterated that law, whether parliamentary or subordinate, must be published to enable them to take effect. 43. The Bench additionally clarified that the claim for legitimate expectation or promissory estoppel arising from the Press Release dated 01.10.2009 would not survive as the Central Government was neither a party to the PPA nor was the same subject to any judicially enforceable promise and no order of any court gave the said Press Release a legal force. Concluding, the 3- Judge Bench, relying on numerous precedents, confirmed that only duly promulgated notifi....
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....008 of the Norms Committee, it was contended that a power project was indeed recognised to fall within the ambit of "capital goods", reiterating that key components such as turbines and generators used within a plant are an integral input, enabling the project to be entitled to advanced authorization benefits, which, as further contented, are akin to the duty drawback contemplated under Para 8.3(c) of the FTP. 48. It was further argued that the whole process of developing a power plant constitute as "manufacture" when placed in juxtaposition to the definition so provided under Para 9.36 of the FTP as it adopts a broader definition, including making, assembling, fabricating, processing, and bringing new product into existence. Such comprehensive scope, as contended, would also cover activities of construction where the imported and indigenous materials, such as the boilers, turbines, and generators are assembled on-site, resulting in a new, and functional power plant. This was further contented to be in line with the clarification issued by the DGFT on 05.12.2000, apparently stating that assembly and commissioning at site to constitute "manufactured in India" for the purpose of a....
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....r this, it is contended that such importation would imply to squarely fall within the definition of "eligible supplier" under Para 8.2(f) of the FTP for the said goods are said to be procured from domestic manufacturers supplying against an process of ICB. It is pressed into service on part of the Appellants that on the mandate of ICB as per Para 8.4.4(iv) of the FTP, APTEL further erred in adopting a restrictive interpretation and the mandate was complied with at the stage of Independent Power Producer stage in light of the DGFT Clarification dated 14.08.2008. Subsequent arrangements made for stage of Engineering and Procurement, and construction through sub-contracts does not dilute the aforesaid compliance. 53. Concluding, it is contended that the projects were duly certified as MPP and a subsequent refusal to extend such deemed export benefits would be in derogation of the mandate of the FTP. 54. Alternatively, the Appellants have also argued that as per a collective reference to the FTP and the MPP, if it is to be held that they were not entitled to the deemed export benefits under the FTP as MPP, owing to the same eligibility conditions for a non-MPP under the FTP, as o....
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.... (h) Supply of marine freight containers by 100% EOU (Domestic freight containers- manufacturers) provided said containers are exported out of India within 6 months or such further period as permitted by customs; (i) Supply to projects funded by UN Agencies; and (j) Supply of goods to nuclear power projects through competitive bidding as opposed to ICB. Benefits of deemed exports shall be available under paragraphs (d), (e), (f) and (g) only if the supply is made under procedure of ICB. 8.3 Benefits for Deemed Exports Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to terms and conditions as in HBP v1:- (a) Advance Authorisation / Advance Authorisation for annual requirement / DFIA. (b) Deemed Export Drawback. (c) Exemption from terminal excise duty where supplies are made against ICB. In other cases, refund of terminal excise duty will be given. Exemption from TED shall also be available for supplies made by an Advance Authorisation holder to a manufacturer holding another Advance Authorization ....
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....ts as specified in S.No. 400 of DoR Notification No. 21/2002-Customs dated 1.3.2002, as amended, shall be eligible for deemed export benefits as mentioned in paragraph 8.3(a), (b) and (c) of FTP, whichever is applicable, if such mega power project complies with the threshold generation capacity specified therein, in Customs Notification. (v) Supplies under paragraph 8.2(g) of FTP to new refineries being set up during Ninth Plan period and spilled over to Tenth Plan period, shall be entitled for deemed export benefits in respect of goods mentioned in list 17 specified in S.No. 228 of Notification No. 21/2002-Customs dated 1.3.2002, as amended from time to time. Supplier shall be eligible for benefits listed in paragraphs 8.3(a) and (b) of FTP, whichever is applicable. 8.4.5 In respect of supplies made under paragraph 8.2(e) of FTP, supplier shall be eligible for benefits listed in paragraph 8.3(a) and (b) of FTP, whichever is applicable. Benefit of deemed exports shall be available in respect of supplies of capital goods and spares to Fertilizer Plants which are set up or expanded / revamped / retrofitted / modernized during Ninth Plan period. Benefit of d....
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.... sub- contractor of an Indian or foreign main contractor directly to the designated projects / Agencies, shall also be eligible for deemed export benefits provided sub-contractor is indicated either originally or subsequently in the contract, and payment certificate is issued by project authority in the name of sub-contractor as in Appendix 22C of HBP v1." The following definitions within FTP also ought to be referred: "9.12 'Capital Goods' means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion. It also includes packaging machinery and equipment, refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipment and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in services sec....
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....ined as: "'GOODS' means every kind of movable property other than actionable claims and money; and includes stocks and shares, growing crops, grass and things attached, to or forming part of the land which are agreed to be severed before sale or under the contract of sale. [Sale of Goods Act (3 of 1930), S. 2(7)] For the purposes of this clause, "goods" includes any article material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable. [Central Excise Act (1 of 1944), S. 2, Expln. as inserted by Finance Act (18 of 2008), S. 78] xxx xxx xxx 'Goods' means all kinds of movable property other than actionable claims, stocks, shares and securities, and includes all materials, articles and commodities including the goods (as goods or in some other form), involved in the execution of a works contract or those goods used or to be used in the construction, fitting out, improvement or repair of movable or immovable property and also includes all growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale ....
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....on of India and Another v. Delhi Cloth and General Mills Co. Ltd. 1962 SCC OnLine SC 148. and was reiterated in the subsequent decisions of this Court in Collector of Central Excise, Baroda v. Ambalal Sarabhai Enterprises (P) Ltd. (1989) 4 SCC 112 and Union Carbide India Limited v. Union of India and Others (1986) 2 SCC 547. Therefore, it stands settled that an immovable property, especially a machinery embedded to earth, as in the instant case, would fail the aforesaid test. 61. It is also true that Captive Power Plants have been recognized as "capital goods" within the scope of subsequent FTP, but those importable products are movable and cannot be equated to the Project Plant in the instant case. The correct means to analyse and determine expression "capital goods" would be subject to the definition of the term "goods" especially when Para 9.12 of the FTP only encompasses movable items. It would not be possible within the given canvas to hold that an embedded power plant of hundreds of Mega Watts would be able to qualify as "capital goods" for entitlement of the Appellants under the FTP for the deemed export benefits. 62. The second prerequisite is derived from the opening....
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....t must be so changed as to have a positive and specific use in its new state. 'The process of making a thing by art.' (Burrill) The word 'manufacture' is a compound word of Latin origin derived from the words "manu," by hand and "facere," to do, to make, to form; but the meaning is not confined to that which is done by hand alone, but by machinery as well. (In re Tecopa Min, etc., Co., 110 Fed 120, 121. See also 110 IC 788: 29 Cr LJ 756: 1928 Pat 506) xxx xxx xxx Etymologically, 'manufacture' is a compound word from Latin "manu" meaning "hand" and "facere" which means "made". Thus, in its primary sense, 'manufacturing' is fashioning of a raw or wrought material by manual or mechanical manipulation, resulting in its transformation; a new and different article must emerge having a distinctive name, character or use. Raghbir Chand Som Chand v. Excise & Taxn. Officer, (1960) 11 STC 149, 164-5 (Punj). Also see North Bengal Stores Ltd. v. Board of Revenue, (1938-50) 1 STC 157, 163-4 (Cal); State of Bihar v. Chrestien Mica Industries Ltd., (1956) 7 STC 626, 631 (Pat), affirmed (1961) 12 STC 150 (SC); G.R. Kulkarni v. The State,....
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.... in Section 2(f) the legislature intended to equate 'processing' to 'manufacture' and intended to make more 'processing' as distinct from 'manufacture' in the sense of bringing into existence of a new substance known to the market, liable to duty. The sole purpose of inserting this definition is to make it clear that at certain places in the Act the word 'manufacture' has been used to mean a process incidental to the manufacture of the article. Thus in the very item under which the excise duty is claimed in these cases, we find the words; 'in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power'. The definition of 'manufacture' as in Section 2(f) puts it beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article known to the market the clause will be applicable; and an argument that power is not used in the whole process of manufacture using the word in its ordinary sense, will not be available. It is only with this limited purpose that the legislature, in our opinion, inserted this definition of the word 'manufacture' in the definit....
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....n respect of the making thereof. [Cine Workers and Cinema Theatre Workers (Regulations of Employment) Act (50 of 1981), Section 2(i).] *** The word 'production' may designate as well a thing produced as the operation of producing; (as) production of commodities or the production of a witness. *** 'Manufacture' includes any art, process or manner of producing, preparing or making an article, and also any article prepared or produced by manufacture. [Patents and Designs Act (2 of 1911), Section 2(10).] *** 'Manufacture' includes any process- (i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the section or Chapter Notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, or, and the word 'manufacturer' shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account; (iii) which is specified in relation to any goods....
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.... categorization of "supply of goods" to power projects and refineries not covered in Para 8.2(f) which, in turn, deals with supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits import of such goods at zero customs duty. Therefore, we are inclined to accept the contentions raised on behalf of PSPCL and observe this condition to remain unfulfilled. 69. The fourth foundational prerequisite to avail the deemed export benefits, as stipulated through Para 8.2, read with Para 8.6 of the FTP mandates that the supply of goods must be effected either by the main contractor or the sub-contractor to the concerned project. In the present factual matrix an entitlement to the deemed export benefits only accrue when the goods, as manufactured by the main contractor, are supplied to the Project, herein being either the NPL or TSPL, or in the alternative, the goods are manufactured by the sub-contractor and supplied directly to the project or through the main contractor. However, it appears that before the forums of law below, and even at the time of bidding, the to-be then constructed Power Plant itself was deemed as the concerned capi....
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....v) it was not required to conduct ICB at the Engineering Procurement Contract stage. 72. A perusal thereof, clarifies that 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. Reli....