HC Provides Solar Developer Protection Against Retroactive Refusal Of Reduced Customs Duty


ReNew Hans Urja, a solar developer, has been given temporary protection by the Delhi High Court from the retroactive denial of a reduced rate of customs duty on imports for a 600 MW solar power project.


Since the products had already been registered under the Project Import Regulations Act of 1986, the Court instructed the Customs Board, a division of the Central Board of Indirect Taxes and Customs (CBIC), not to take any further action regarding the import of commodities.


A 600 MW solar power plant is being developed by ReNew Hans Urja in the Jaisalmer area of Rajasthan. It claimed to the Commission that it was within its rights to import materials required for the project at a reduced rate of duty.


Many businesses asked the Customs department to permit imports under the Act, which provided for a single and concessional rate customs duty rate for the majority of the equipment needed to set up a power project 

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This was after the government increased basic customs duty on imported solar modules by 40% earlier this year.

The Act does not, however, explicitly state that solar installations are covered by the restrictions. Though it was unclear whether the amendment would be implemented prospectively or retroactively, the government modified the Act in October to expressly forbid the use of the provisions for solar installations.

But the Customs Board said that this right had been revoked as of the notification of October 19, 2022.

Even if the announcement were to be taken at face value, the solar developer pointed out that it was planned to go into effect on October 20, 2022. It made the case that since its solar project had started before the notice date, it should still be eligible for the discounted rate of customs duty.

The Customs Board said that the petitioner did not meet the requirements for receiving the concessional rate of duty.

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The petitioner claimed that the Customs Board’s judgment violated the law and had intruded on the developer’s rights retroactively.

The developer further stated that it had submitted a continuity bond for Rs. 18.45 billion and a bank guarantee of Rs. 10 million. 

The High Court noted that the entire importation procedure would probably fail if the developer wasn’t given temporary protection. 

HC said that because ReNew Hans Urja has presented a substantial continuity bond and bank guarantee, thereby, no action should be taken against the developer at this point in the import process.

Although a letter of credit is scheduled to be issued between March and April 2023, the project’s execution may be delayed since it is unclear if the petitioner will be granted a concessional rate of duty or not.

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