In a significant relief for Adani Power Ltd, the Supreme Court on Monday ruled that customs duty cannot be levied on electricity supplied from a Special Economic Zone (SEZ) to the domestic market, setting aside a 2019 Gujarat High Court judgment and freeing the company from the levy on power generated at its Mundra plant.
A bench of justices Aravind Kumar and NV Anjaria held that the levy lacked the authority of law and that the government cannot retain amounts collected under an invalid tax. The court directed customs authorities to refund the duty collected from Adani Power, asking the jurisdictional Commissioner of Customs to complete verification and issue refunds within eight weeks from the date of the judgment.
The ruling resolves a long-running tax dispute dating back to 2010. The 2019 Gujarat High Court had cited customs duty collections of around ₹458 crore, excluding interest.
The detailed judgment was not available at the time of publication. An email sent to the Adani Group seeking comment remained unanswered till press time.
Tax overturned
Adani Power operates a coal-based thermal power plant within the Mundra Special Economic Zone in Gujarat’s Kutch district, near Mundra Port. The plant has an installed capacity of 4,620 MW and supplies electricity under long-term power purchase agreements to distribution companies in Gujarat and Haryana, as well as to the utility serving the Mundra SEZ.
The dispute traces its origins to February 2010, when the Centre amended customs rules to impose duty on electricity supplied from an SEZ to the Domestic Tariff Area (DTA), with authorities also seeking to apply the levy retrospectively from June 2009. At the time, electricity imported into India from foreign countries continued to attract nil customs duty.
Adani Power challenged the levy before the Gujarat High Court, which in July 2015 struck down parts of the duty framework and held that the company was entitled to exemption on SEZ-to-DTA electricity supplies, but only for a limited period between June 2009 and September 2010. The Supreme Court later declined to interfere with that ruling.
Following the 2015 judgment, SEZ authorities took the view that the exemption was strictly time-bound and that customs duty remained payable on electricity supplied after September 2010. Customs authorities continued to raise demands based on subsequent notifications issued in 2010 and 2012, which reduced the duty rate from 10 paise per unit to 3 paise per unit.
Adani Power stopped paying the duty and sought refunds, arguing that once the levy itself had been found illegal, later notifications could not revive it. Authorities countered that the relief granted in 2015 was limited to a specific period and that fresh challenges were required for subsequent notifications.
Disagreeing with this position, Adani Power returned to the Gujarat High Court in 2016, seeking a declaration that it had no liability to pay customs duty on SEZ-to-DTA electricity supplies even beyond the earlier period, along with a stay on recovery and refund of amounts already paid.
In June 2019, the Gujarat High Court rejected Adani Power’s plea, ruling that the 2015 judgment had limited the exemption to a specific period and could not be extended through a fresh petition. The court said a wider exemption could give Adani Power an unfair advantage and held that duty exemptions for imported electricity could not automatically apply to power generated in an Indian SEZ.
Adani Power challenged the 2019 decision before the Supreme Court. The Supreme Court has now overturned that view. Once a levy is held to be illegal, the bench said, the government cannot retain money collected under it, making refunds a necessary consequence.
The Mundra plant was earlier owned by Adani Power (Mundra) Ltd, a special purpose vehicle that was merged into Adani Power Ltd under a scheme of amalgamation effective 1 October 2021.
The ruling comes as Adani Power steps up expansion. The company has been winning competitive power supply tenders across Uttar Pradesh, Bihar, Madhya Pradesh and Assam, and has announced several ultra-supercritical greenfield projects.
Key projects announced in 2025 include a 1,500 MW plant in Uttar Pradesh, a 2,274 MW project in Bihar, a 1,600 MW ultra-supercritical plant in Madhya Pradesh, and a 3,200 MW greenfield project in Assam.
According to a PTI report, Adani Power has raised its long-term installed capacity target to 41.87 GW by FY32 and committed capital expenditure of about ₹2 trillion, marking one of the most aggressive private-sector expansion plans in India’s thermal power industry.
The revised target represents a sharp increase from its earlier plan of 30.67 GW by FY30, as the company positions itself to meet India’s rising electricity demand over the coming decades.
