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6 Jan 2026·Source: The Indian Express
6 min
Polity & GovernanceEconomyPolity & GovernanceNEWS

Supreme Court Overturns High Court Order on Adani Power's Customs Duty Case

SC rules in favor of Adani Power, setting aside a High Court order regarding customs duty on imported equipment.

Supreme Court Overturns High Court Order on Adani Power's Customs Duty Case

Photo by Suzi Kim

The Supreme Court on January 5, 2026, allowed an appeal by Adani Power Limited, setting aside a Gujarat High Court order that had directed the company to pay customs duty on imported power generation equipment. The apex court ruled that the High Court had erred in its interpretation of the relevant customs notifications and the scope of duty exemptions. Context & Background The dispute originated from Adani Power's import of equipment for its power projects, for which it claimed exemption from customs duty under specific government notifications. The Directorate of Revenue Intelligence (DRI) had initiated proceedings, alleging undervaluation and non-eligibility for exemptions, leading to a demand for duty payment. The Gujarat High Court had sided with the DRI, prompting Adani Power to appeal to the Supreme Court. Key Details & Facts A bench of Justices M.R. Shah and C.T. Ravikumar held that the High Court had exceeded its jurisdiction by delving into factual aspects that were still under adjudication by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The Supreme Court clarified that the High Court's role was limited to interpreting the law, not re-evaluating evidence. The judgment emphasized that the customs notifications, particularly those related to Mega Power Projects, should be interpreted broadly to achieve their legislative intent of promoting infrastructure development. Implications & Impact This verdict provides significant relief to Adani Power, potentially saving it substantial amounts in customs duties and penalties. More broadly, it clarifies the jurisdictional boundaries between High Courts and tribunals in customs and excise matters. It also reinforces the principle of interpreting tax exemptions in favor of the assessee when the legislative intent is clear, which could benefit other infrastructure projects importing equipment. Different Perspectives While the industry welcomed the clarity provided by the Supreme Court, revenue authorities might view this as a setback in their efforts to curb alleged duty evasions. The judgment underscores the ongoing tension between revenue collection and promoting industrial growth through tax incentives. Exam Relevance This case is relevant for UPSC GS Paper 2 (Polity & Governance - Judiciary, Constitutional Law) and GS Paper 3 (Economy - Taxation, Infrastructure, Government Policies). It highlights the interpretation of tax laws, judicial review, and the role of appellate tribunals.

Key Facts

1.

Supreme Court allowed Adani Power's appeal

2.

Date: January 5, 2026

3.

Set aside Gujarat High Court order on customs duty

4.

Case related to imported power generation equipment

5.

Bench: Justices M.R. Shah and C.T. Ravikumar

6.

SC clarified High Court's limited role in interpreting law, not re-evaluating evidence

7.

Customs notifications for Mega Power Projects to be interpreted broadly

UPSC Exam Angles

1.

GS Paper 2: Judiciary - Jurisdiction of High Courts and Supreme Court, role of tribunals, judicial review vs. judicial restraint, interpretation of laws.

2.

GS Paper 3: Economy - Taxation (Customs Duty, exemptions), Infrastructure (Mega Power Projects, government policies), Government Policies (fiscal incentives, ease of doing business).

3.

Constitutional Law: Articles related to High Court's jurisdiction (226, 227), Supreme Court's appellate jurisdiction (136), principles of statutory interpretation.

Visual Insights

Appellate Process in Customs Duty Disputes: The Adani Power Case Path

This flowchart illustrates the typical appellate hierarchy for customs duty disputes in India, highlighting the path taken by the Adani Power case and clarifying the jurisdictional roles of various bodies, as emphasized by the Supreme Court's ruling.

  1. 1.DRI Initiates Proceedings (Alleging undervaluation/non-eligibility)
  2. 2.Adjudication by Customs Authorities (Original Authority)
  3. 3.Appeal to Commissioner (Appeals)
  4. 4.Appeal to CESTAT (Customs, Excise and Service Tax Appellate Tribunal)
  5. 5.Appeal to High Court (Only on 'substantial question of law')
  6. 6.Appeal to Supreme Court (On 'any question of law')
More Information

Background

The framework of customs duties in India has a long history, with the Customs Act, 1962, consolidating previous laws and becoming the primary legislation governing import and export duties. Historically, customs duties served as a significant source of government revenue and a tool for trade regulation. Post-economic liberalization in the early 1990s, the government increasingly recognized the need for fiscal incentives to boost critical sectors, particularly infrastructure.

The 'Mega Power Project' policy, for instance, emerged in the late 1990s (around 1998-2000) as a strategic initiative to attract substantial investment in the power sector. This policy offered various concessions, including customs duty exemptions on imported equipment, to make large-scale power projects financially viable and accelerate capacity addition, addressing India's persistent energy deficits. Concurrently, specialized tribunals like the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) were established to provide expert and expeditious adjudication of complex tax disputes, thereby reducing the burden on the regular courts and ensuring specialized legal interpretation.

Latest Developments

In recent years, the Indian government has intensified its focus on infrastructure development through ambitious programs like the National Infrastructure Pipeline (NIP) and PM Gati Shakti, aiming for integrated planning and accelerated project execution. This renewed push often involves a delicate balance between promoting domestic manufacturing under 'Make in India' and allowing essential imports for large-scale projects, which necessitates clear and consistent customs policies. A significant ongoing trend is the government's drive to reduce tax litigation, which has historically plagued the Indian economy, locking up substantial revenue and creating business uncertainty.

Initiatives like the 'Vivad Se Vishwas' scheme and increased emphasis on alternative dispute resolution mechanisms reflect this commitment. However, the interpretation of tax laws, especially exemption notifications, remains a contentious area, with revenue authorities often adopting a strict interpretation to safeguard public exchequer, while industry advocates for a broader view to foster growth. This ongoing tension frequently leads to judicial interventions, shaping the regulatory landscape for businesses and investors.

Practice Questions (MCQs)

1. With reference to the Indian judiciary and tax matters, consider the following statements: 1. The Supreme Court has the power to interpret the law and re-evaluate factual evidence adjudicated by specialized tribunals. 2. High Courts, under Article 226 of the Constitution, can quash orders of tribunals if they exceed their jurisdiction or commit an error of law. 3. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) is the final appellate authority for all customs and excise matters in India. Which of the statements given above is/are correct?

  • A.1 only
  • B.2 only
  • C.1 and 3 only
  • D.2 and 3 only
Show Answer

Answer: B

Statement 1 is incorrect. The Supreme Court, while interpreting the law, generally refrains from re-evaluating factual evidence that has been adjudicated by specialized tribunals, unless there is a perversity in findings or a gross error of law. The recent Adani Power case reinforces that the High Court's role (and by extension, the SC's in appeal) is limited to interpreting the law, not re-evaluating evidence already under tribunal's purview. Statement 2 is correct. High Courts, under Articles 226 (writ jurisdiction) and 227 (supervisory jurisdiction), can intervene if a tribunal acts without jurisdiction, exceeds its jurisdiction, or commits a manifest error of law apparent on the face of the record. Statement 3 is incorrect. CESTAT is an appellate authority, but its decisions can be challenged before the High Court (on questions of law) and subsequently before the Supreme Court.

2. In the context of tax exemptions and infrastructure development in India, which of the following statements is/are correct? 1. Customs duty exemptions for 'Mega Power Projects' were primarily introduced to reduce project costs and attract investment in the power sector. 2. The principle of interpreting tax exemption notifications broadly in favor of the assessee is a recent judicial innovation. 3. The Directorate of Revenue Intelligence (DRI) is the primary agency responsible for adjudicating customs duty disputes at the first instance. Select the correct answer using the code given below:

  • A.1 only
  • B.2 and 3 only
  • C.1 and 2 only
  • D.1, 2 and 3
Show Answer

Answer: A

Statement 1 is correct. Customs duty exemptions for 'Mega Power Projects' were indeed introduced to reduce the capital cost of such projects, making them more attractive for investors and accelerating power generation capacity. Statement 2 is incorrect. The principle of interpreting beneficial legislations, including tax exemptions for promoting economic activity, broadly in favor of the assessee when legislative intent is clear, is a well-established judicial principle, not a recent innovation. The Supreme Court has consistently upheld this principle over decades. Statement 3 is incorrect. The DRI is an intelligence and enforcement agency that investigates and detects customs duty evasions. It initiates proceedings, but the actual adjudication (passing an order demanding duty) is done by a proper adjudicating authority (e.g., Commissioner of Customs), not the DRI itself.

3. Consider the following statements regarding the appellate hierarchy in customs and excise matters in India: 1. An appeal against an order passed by the Commissioner of Customs (Adjudication) primarily lies with the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). 2. A High Court can entertain an appeal against a CESTAT order only on questions of law, not on questions of fact. 3. The Supreme Court's jurisdiction to hear appeals from High Courts in customs matters is primarily under its advisory jurisdiction. Which of the statements given above is/are correct?

  • A.1 only
  • B.2 only
  • C.1 and 2 only
  • D.1, 2 and 3
Show Answer

Answer: C

Statement 1 is correct. The first appeal against an order of the Commissioner of Customs (Adjudication) or Commissioner of Central Excise lies with the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). Statement 2 is correct. High Courts, under the relevant provisions (e.g., Section 130 of the Customs Act), entertain appeals from CESTAT only on 'questions of law' and not on 'questions of fact'. This is a crucial distinction that the Supreme Court emphasized in the Adani Power case. Statement 3 is incorrect. The Supreme Court's jurisdiction to hear appeals from High Courts in customs matters is primarily under its appellate jurisdiction (e.g., Article 136 - Special Leave Petition, or Article 133/134 if a certificate is granted), not its advisory jurisdiction (Article 143).

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