2026-VIL-01-SC-CU
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CUSTOMS Supreme Court Cases

Customs/SEZ - Legality of Customs duty on electricity generated in a Special Economic Zone (SEZ) and supplied to the Domestic Tariff Area (DTA) – Appellant operates a coal-based thermal power plant within SEZ and the electricity generated at this plant is partly consumed within the SEZ and substantially supplied to buyers in the DTA - Whether customs duty can be levied on the clearance of electrical energy from the appellant's SEZ unit to the DTA – HELD - There was no "import into India" that could trigger the charging event under Section 12 of the Customs Act, as an SEZ is not a foreign territory. The legal fiction in Section 30 of the SEZ Act only allows ascertainment of the rate of duty applicable to comparable imports, not the conversion of intra-national supply of electricity into an act of import - The Respondent’s attempt to impose the duty through Notification No. 25/2010-Cus., which was couched as an "exemption" notification, is a colourable exercise of delegated authority, as Section 25 of the Customs Act is a power to relax duty, not to create a new levy. The retrospective application of the duty also violated Article 265 of the Constitution, which requires authority of law for every tax levy and collection - The structure of the levy created an arbitrary and unfair double burden, as the SEZ Rules already ensured that the benefit of duty-free inputs was clawed back to the extent electricity left the zone for the DTA - the levy of customs duty on electrical energy cleared by the appellant from its SEZ unit to the DTA during the relevant period, as sought to be enforced through Notification No. 25/2010-Cus., Notification No. 91/2010-Cus., Notification No. 26/2012-Cus., and similar instruments, is without authority of law – The authorities are directed to refund the amounts deposited by the appellant towards Customs duty on the clearance of electrical energy from its SEZ unit to the DTA for the period from 16 September 2010 to 15 February 2016 – The impugned order by the High Court is set aside and the appeal is allowed
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