New Delhi (ABC Live): At first glance, Adani Power Ltd. v. Union of India appears to be a narrow tax dispute over customs duty on electricity supplied from a Special Economic Zone (SEZ) to the Domestic Tariff Area (DTA). However, on closer scrutiny, the case raises far deeper constitutional issues.

In substance, the Supreme Court of India reasserts three core principles. First, taxation requires a clear legislative charge. Second, delegated legislation cannot create a tax that Parliament never approved. Third, binding judicial rulings constrain the State as well as coordinate courts.

Therefore, the judgment draws a firm line between lawful governance and executive convenience.

Background in Brief: The Long Arc of the Dispute

Adani Power operated a thermal power plant inside the Mundra SEZ. While the company consumed part of the electricity within the SEZ, it supplied a substantial portion to the DTA. Section 30 of the SEZ Act permits customs duty on such clearance only if imported goods would attract duty.

However, imported electrical energy attracts nil customs duty.

Despite this, the Union introduced customs duty through notifications issued in 2010. Initially, these notifications imposed a 16% ad valorem duty with retrospective effect. Subsequently, the administration replaced this with fixed per-unit rates.

In 2015, the Gujarat High Court struck down the levy. Specifically, the Court held that no charging event existed and that Section 25 of the Customs Act could not support a tax. Later, the Supreme Court allowed that ruling to attain finality.

👉 Gujarat High Court (2015):
https://indiankanoon.org/doc/169827398/

Nevertheless, the administration continued to collect duties under modified notifications. Consequently, in 2019, the Gujarat High Court declined to extend the 2015 ruling to later periods. As a result, that refusal triggered the present appeal.

The Supreme Court’s Core Holding

The Supreme Court rejected the Union’s position in clear terms. In doing so, the Court held that:

• First, Section 12 of the Customs Act does not create a charging event for SEZ electricity.

• Second, Section 25 allows exemption, not taxation.

• Third, changing rates or formats cannot cure a levy that lacks authority.

• Fourth, coordinate benches cannot narrow binding declarations of law.

• Finally, the State must refund money collected under an illegal levy.

Thus, the Court restored constitutional discipline to fiscal administration.

Delegated Legislation: When “Exemption” Turns into Taxation

Section 25 of the Customs Act empowers the executive to exempt goods from duty that already exists. However, it does not allow the executive to invent a tax.

In this case, Notification No. 25/2010-Cus. claimed to grant an exemption. In practice, however, it imposed a duty, fixed its rate, and applied it retrospectively. Accordingly, the Court treated the notification as a colourable exercise of power.

More importantly, the Court reinforced a settled rule of administrative law: courts must test substance, not labels. Therefore, when a notification operates like a tax, courts must strike it down—even if it describes itself as an exemption.

In this respect, the judgment aligns with ABC Live’s analysis of how subordinate legislation often exceeds statutory limits:
👉 ABC Live Internal Link: https://abclive.in/2025/12/08/subordinate-legislation/

How the Courts Diverged: A Comparative Judicial Trajectory

To fully understand the Supreme Court’s intervention, one must track how the issue moved across courts—from clarity in 2015, to dilution in 2019, and finally to correction in 2026.

Comparative Table: Gujarat HC (2015) vs Gujarat HC (2019) vs Supreme Court (2026)

Why the 2019 Judgment Failed Judicial Discipline

The comparison clearly shows the core flaw in the 2019 judgment. Once the 2015 bench declared the levy unconstitutional—and that ruling attained finality—the later bench had only two lawful options. Either it could follow the ruling or refer the matter to a larger bench.

Instead, the 2019 bench restricted the earlier declaration to one notification and one period. Consequently, the Supreme Court rejected this method. In effect, the Court held that courts cannot dilute settled law through procedural segmentation.

Restitution and State Accountability

The Union argued that Adani Power could not claim refunds because it had not challenged every later notification. However, the Court rejected this argument.

Once a court declares a levy unconstitutional, the State cannot retain the money collected under it. In other words, the form of the levy does not matter. Rather, the absence of legal authority controls the outcome.

Therefore, restitution follows as a constitutional duty.

Critical Appraisal: Strengths and Limits

Strengths

• First, the judgment restrains executive overreach.

• Second, it draws firm limits on delegated taxation.

• Third, it enforces judicial consistency.

• Finally, it shields taxpayers from repeated litigation.

Limits

At the same time, the ruling operates within the existing legal framework. Parliament still holds the power to legislate a valid charging provision. Thus, the judgment insists only that taxation must flow from law, not notification.

Conclusion: A Constitutional Course Correction

Adani Power Ltd. & Anr. v. Union of India & Ors., 2026 INSC 1 goes far beyond tax law. Ultimately, the decision restores constitutional order.

In clear terms, the Supreme Court sends a message:
The executive cannot achieve indirectly what the Constitution forbids directly.

Therefore, in an era of expanding subordinate legislation, this ruling reasserts that Parliament taxes, courts interpret, and the executive obeys.

Editorial Note for ABC Live

By integrating this comparative table into the main narrative, the case comment now visually and doctrinally demonstrates how constitutional clarity eroded and was subsequently restored. This structure strengthens reader comprehension, improves credibility, and aligns with Google News–safe analytical formatting.