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2025 (8) TMI 1084
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....ons 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 "Change in Law" event under the PPA. 3. Similarly, Civil Appeal No....
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....ects 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 Power, Government of India, which was granted to it on 30.07.2010. 11. For its application to obta....
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....n 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 computation. Also, that the said benefits were not withdrawn until the Public Notices of April 2011 on behalf of....
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....n 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 competent authority. Therefore, the said Public Notices were merely administrative policy instruments, not meeting the thre....
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.... 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 Power Policy, which promised concessional customs duty and full exemption from excise duties for thermal power projects exceed....
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....992 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 fall within the ambit of Article 13. 31. Addressing PSPCL's argument on estoppel, it asserts that its Affidavit dated 23.05.2011 was exec....
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....ation 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 upon issues relating to the Project. 13.2 Application and Principles for computing impact of Change in Law While determining the consequence of Change in Law under this Article 13, the Parties shal....
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....f 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, if the Change in Law is on account of a change in interpretation of Law. 13.4.2 The payment for Changes in Law shall be through Supplementary Bill as mentioned in Article 11.8. However, in case of any change in Tariff by reason of Change in Law, as determined in accordance with this Agreement, the Monthly Invoice to be raised by....
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....1 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 01.10.2009. Therein, the 3-Judge Bench of this Court went on to observe that the fulcrum of the claim of the Appellant therein is anchored in the assertion that the Press Release dated 01.10.2009 was not merely a policy statement but a clear indication of an imminent shift in the regime of law governing the field. Appellant therein also claimed the said ....
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....e 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 notifications, and not Press Releases or Communications, would constitute as "Change in Law". Accordingly, no "Change in Law" had occurred until the Notifications dated 11.12.2009 and 14.12.2009, thereby implying that the benefits would have been deemed to be accrued only from the said dates. 44. Therefore, the aforesaid decision of 3-Judge Bench in Nabha Powe....
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....wback 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 availing deemed export benefits under the FTP. As the said clarification was in force as on the bid date, the Appellants met the criterion for "manufactured in India", thereby fulfilling both the critical conditions for availing the aforesaid benefits. 49. Having failed on the said contentions before the APTEL, it appears that the Appellants have moulded the conten....
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....L 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 on the cut-off date, they were equally entitled as a non-MPP. 55. Countering the aforesaid contentions raised on behalf of the Appellants, learned Senior Advocate on behalf of the opposing Respondent(s), while vehemently contesting the claims of the Appellants have reiterated their successful claims before the APTEL. 56. Before we delve into the submissions moved by the Appel....
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.... 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 if such manufacturer, in turn, supplies the product(s) to an ultimate exporter. Benefits to the Supplier 8.4 .1 (i) In respect of supplies made against Advance Authorisation / DFIA in terms of paragraph 8.2(a) of FTP, supplier shall be entitled to Advance Authorisation / DFIA for intermediate supplies. (ii) If supplies are made against Advance Release Order (ARO) or Back to Back Letter of Credit issued against Advance Authorisation / DFIA in terms of paragraphs 4.1.11 and 4.1.12 of FTP, suppliers shall be entitled to benefits....
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....cation 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 deemed exports shall also be available on supplies made to Fertilizers Plants, which have started in the 8th / 9th Plan periods and spilled over to 10th Plan period. 8.4.6 Supplies of goods to projects funded by UN Agencies covered under para 8.2(i) of FTP are eligible for benefits listed in paragraph 8.3(a) and (b) of FTP, whichever is applicable. 8.4.7 In respect of supplies made to Nuclear Power Projects under para 8.2(j) of FTP, the supplier would be eligible for benefits given in para 8.3(a), (b) and (c) of FTP, whichever is applicable. Supply of only those goods required for setting up any Nuclear Power P....
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....l 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 sector. xxx xxx xxx 9.14 'Component' means one of the parts of a sub- assembly or assembly of which a manufactured product is made up and into which it may be resolved. A component includes an accessory or attachment to another component. xxx xxx xxx 9.36 'Manufacture' means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labelling, Re-conditioning repair, remaking, refurbishing, testing, calibration, re-engineering. Manufacture, for the purpose of FTP, shall also include agriculture, aquaculture,....
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...., 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 and also includes motor spirit."[A.P. General Sales Tax Act (6 of 1957), S. 2(1)(h) as cited in Tata Consultancy Services v. State of A.P., (2005) 1 SCC 308, 316, para 7]) xxx xxx xxx 'GOODS' means all kinds of movable property (other than newspaper, actionable claims, stocks and shares and securities), and includes, all materials, commodities, and articles including the goods, as goods or in some other form) involved in the execution of a work-contract or, those goods to be used in the fitting out improvement or repair of moveable property and all growing crops, grass or things, attached to, or forming part of, the lands which are agreed to be severed before sale or under the contract of sale. [Karnataka Sales Tax Act (25 of 1957), S. 2(m) and T.N. General Sales Tax A....
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....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 paragraph of Para 8.2 of the FTP makes it obligatory that concerned goods as required to be supplied must be manufactured in India. Para 9.36 of the FTP goes on to define "manufacture" as making, producing, fabricating, assembling, processing, or otherwise bringing into existence, by hand or machine, a new product with a distinctive name, character, or use, and goes on to include processes like refrigeration, repacking, polishing, labelling, reconditioning, repairing, remaking, refurbishing, testing, calibration, and re-engineering, as well as activities like agriculture, horticulture, floriculture, animal husbandry, pisciculture, poultry, sericulture, viticulture, and mining. Dealing further with "manufacture", we may refer to the Fifth edition of P. Ramanatha Aiyar's Advanced Law Lexicon wherein, the varied and ....
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....nd 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, (1957) 8 STC 294 (MP); CIT v. Casino (Pvt.) Ltd., (1973) 91 ITR 289 (Ker) xxx xxx xxx 'The word 'Manufacture',' said ABBOTT, C.J., in R. v. Wheeler, 2 B. & Ald. 349, has been generally understood to denote, either a thing made which is useful for its own sake and vendible as such, as a medicine, a stove, a telescope, and many others; or to mean an engine or instrument, or some part of an engine or instrument, to be employed either in the making of some previously known article, or in some other useful purpose, as a stocking frame, or a steam engine for raising water from mines; or, it may, perhaps, extend also to a new process to be carried on by known implements or elements acting upon known substances, and ultimately producing some other known substance but producing it in a cheaper or more expeditious manner, or of a better or more useful kind. No mere philosophical or abstract principle ....
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....ower 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 definition section and not with a view to make the mere 'processing' of goods as liable to excise duty." 64. While discussing the meaning of the word "production", a reference was made by this Court to the elaboration of "manufacture" as well in India Cine Agencies v. Commissioner of Income Tax, Madras (2008) 17 SCC 385 in a dispute involving entitlement of benefits under Sections 32-AB, 80-HH, 80-I of Income Tax Act, 1961 as: "5. In Words and Phrases, 2nd Edn. by Justice R.P. Sethi the expressions 'produce' and 'production' are described as under : 'In Webster's New International Dictionary, the word 'produce' means something that is brought forth either naturally or as a result of effort and work; a result produced. In Black's Law Dictionary, the meaning of the word 'produce' is to 'bring into view or notice; to bring to surface'. A reading of the aforesaid dictionary meanings of the word 'produce' does indicate that if a l....
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....y person who engages in their production or manufacture on his own account; (iii) which is specified in relation to any goods by the Central Government, by notification in the Official Gazette, as amounting to manufacture. [Central Excise Act (1 of 1944), Section 2(f)]' " 65. Placing reliance on this Court's decision in Commissioner of Income Tax, Orissa and Others v. M/s N.C. Budharaja and Company and Others 1994 Supp (1) SCC 280, High Courts, such as that of Kerala, in Commissioner of Income-Tax v. Geo Tech Foundation & Constructions (2000) 241 ITR 90 : 1999 SCC OnLine Ker 341 have also proceeded to hold that while "manufacture" and "produce" are, in the usual understanding, associated with movable articles and goods, the same can never be deemed to also include or to denote an activity amounting to construction. 66. Similarly, in Moti Laminates Pvt. Ltd. and Others v. Collector of Central Excise, Ahmedabad (1995) 3 SCC 23, this Court observed that excise duty can only be applied to the produced goods which are usable, movable, saleable, and marketable. Also from the aforementioned decisions like the Union Carbide India (supra), Bhor Industries Limited, Bombay v. Collector of....
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....elow, and even at the time of bidding, the to-be then constructed Power Plant itself was deemed as the concerned capital goods for the deemed export benefits, implying that there was no distinct supply of goods by either a main contractor or a sub-contractor thereof. Rather, a claim to seek the benefits in respect of the entire power plant was made. Such a situation of suo moto acclaimed manufacturing in the Project's own right shall not stand the instant test. 70. The fifth prerequisite for availing the aforementioned benefits under the FTP is a strict adherence to the necessity of procurement of goods through ICB, as stipulated in the latter part of the Para 8.2 and Para 8.4.4(iv) of the FTP. Herein, it is categorically made mandatory that the supplies as contemplated under clauses (d), (e), (f), and (g) of the Para 8.2 would qualify for the deemed export benefits only if the same is so effected through the mandate of ICB. Moreover, Para 8.4.4(iv) provides that the supply of capital goods and permissible spare up to 10% of the Free on Rail value to the concerned power projects under Para 8.2(g), subject to the condition that ICB has been adopted either at the stage of Independen....
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....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. 73. Considering the above contentions as raised before us albeit for the first time, 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. 74. 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.....