Recently, the Supreme Court held that a coordinate bench of a High Court cannot dilute or sidestep a binding earlier decision merely because the Bench has changed. The Court ruled that the Gujarat High Court erred in refusing relief to Adani Power despite a settled 2015 judgment on the same issue, emphatically observing that “the law cannot change with the change of the Bench.”
Brief facts:
The case arose from a challenge to the levy of customs duty on electricity generated by Adani Power at its plant in the Mundra Special Economic Zone and supplied to the Domestic Tariff Area. The Union sought to impose such a duty retrospectively, which was struck down by the Gujarat High Court as unconstitutional for want of a charging event under Section 12 of the Customs Act, 1962, a view that later attained finality. Despite this, Adani Power paid reduced per-unit duty for a subsequent period and sought a refund, but a coordinate bench of the High Court confined the earlier ruling to a limited timeframe, leading to the present appeal.
Contentions of the Appellant:
The Appellant contended that the 2015 Gujarat High Court judgment was not a narrow, notification-specific ruling but a declaration of law on the absence of authority to levy customs duty on SEZ-to-DTA electricity. It was argued that there was no change in statutory provisions or factual circumstances after 2015, and therefore, the later High Court bench was bound to extend the same legal consequence. Emphasis was placed on the principle that a levy held to be without authority of law cannot be revived indirectly through successive notifications or altered rates, and that insisting on fresh challenges would elevate form over substance.
Contentions of the Respondent:
The Respondents contended that the earlier High Court ruling was limited to a specific levy and could not be extended beyond the period it expressly covered. It was argued that the subsequent per-unit duty regime operated on a distinct legal basis and had never been independently assailed. On this footing, the Union submitted that no direction for refund could be issued in the absence of a direct challenge to those later measures, particularly when the appellant had remitted the duty for the subsequent period without raising an immediate objection.
Observation of the Court:
The Court observed that the controversy is not merely fiscal but raises questions concerning “the limits of delegated legislation in matters of taxation” and, more importantly, “the discipline of judicial precedent and the obligation of co-ordinate Benches to adhere to settled law.” The Court held that once a coordinate bench has settled a question of law, it cannot be diluted by a later bench of equal strength, cautioning that “the discipline of precedent is not a matter of personal predilection; it is an institutional necessity.”
The Bench stressed that “stare decisis et non quieta movere… is a working rule which secures stability, predictability and respect for judicial outcomes,” and warned that the law cannot change with the change of the Bench. Criticising the Gujarat High Court’s later approach, the Court noted that if disagreement existed, “the proper course was to request that the question be placed before a larger Bench,” adding that “what it cannot do is to sidestep or whittle down the earlier pronouncement by confining it artificially or by treating it as a fact-specific indulgence.”
The Court further reminded the executive that judicial declarations are not advisory, stating that “judicial pronouncements are not advisory opinions; they are binding commands of law,” and that continuing an invalid levy under altered forms undermines constitutional discipline and the rule of law.
The decision of the Court:
In light of the foregoing discussion, the Apex Court set aside the Gujarat High Court’s judgment, declared that the levy of customs duty on SEZ-to-DTA electricity for the relevant period was without authority of law, and directed the refund of amounts paid by Adani Power without interest within eight weeks.
Case Title: Adani Power Ltd. & Anr. v. Union of India & Ors.
Case No.: SLP (C) No. 24729 of 2019
Coram: Hon’ble Mr. Justice Aravind Kumar and Hon’ble Mr. Justice N.V. Anjaria
Advocate for the Appellant: Sr. Adv. P. Chidambaram, AOR E. C. Agrawala, Advs. Mahesh Agarwal, Anshuman Srivastava, Rohan Talwar, Naman Agarwal
Advocate for the Respondent: AOR Gurmeet Singh Makker
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