SC upholds Maharashtra government's power to withdraw duty breaks for captive units

New Delhi: In a setback to various companies, including Reliance Industries, the Supreme Court on Wednesday upheld the Maharashtra government's power to withdraw its exemption notifications for payment of electricity duty on power generated by their captive power plants and charge 15 paise per unit from companies in the state.

The core issue before the SC was whether the Maharashtra government, having granted exemption from payment of electricity duty to captive power generators, was legally precluded from withdrawing or modifying such exemption granted in 1994 in the exercise of same statutory power.

The state government had challenged the Bombay High Court's 2009 decisions striking down the notifications of April 2000 and April 2001 that withdrew duty exemptions from various companies including RIL, Lupin and Jindal Poly Films, for power generated through captive plants between 2000 and 2005. Its stand was that the notifications did not state that the exemption will continue permanently and no specific period for exemption was given.


While setting aside the two 2009 HC judgments that extended electricity duty exemptions to the industries, a SC Bench comprising Justices PS Narasimha and Alok Aradhe ruled that the state government had the power to withdraw exemptions given to companies on electricity duty. However, the notifications by the government in 2000 and 2001 for withdrawal of electricity duty exemption and charging 15 paise per unit, respectively, would operate only after expiry of one year from their respective dates, it clarified.

In 1994, the state government came up with a notification to not charge electricity duty on the power generated by captive power plants and its utilisation. However, the state withdrew the exemption and imposed duty at 30 paise per unit and later revised it to 15 paise per unit by another 2001 notification.

While the exemption was restored from June 2005, the state declined to extend the benefit between April 1, 2000, and April 30, 2005.