In a significant development for the solar energy sector, the Appellate Tribunal for Electricity recently delivered a landmark ruling, granting compensation to Juniper Green. The case revolved around the imposition of Safeguard Duty (SGD) on the import of solar modules, which had a substantial impact on project costs. The ruling has far-reaching implications for the Indian solar energy industry.
The case, filed under Section 86 of the Electricity Act, 2003, pertained to a Power Purchase Agreement (PPA) dated May 21, 2019, between Juniper Green Sigma Pvt. Ltd. (“Juniper”) and Gujarat Urja Vikas Nigam Ltd (“GUVNL”). Juniper had set up a 120 MW solar PV plant in Gujarat. In July 2018, the Ministry of Finance imposed Safeguard Duty on solar cells imported into India from countries like China PR and Malaysia. The duty ranged from 25% to 15% and was initially applicable until July 29, 2020.
Subsequently, in December 2018, GUVNL issued a Request for Selection Documents (RfS) for the purchase of power from solar projects. Juniper submitted its bid in February 2019, ultimately securing a Power Purchase Agreement in May. The Ministry of Finance extended the Safeguard Duty until July 29, 2021, after its initial term expired in July 2020.
Juniper argued that the extension of the Safeguard Duty constituted a “Change in Law” event under Article 9 of the PPA, justifying compensation. GUVNL contested this claim, arguing that the duty was in effect when Juniper submitted its bid in February 2019.
The Appellate Tribunal’s Decision:
The Appellate Tribunal for Electricity ruled in favor of Juniper, holding that the extension of the Safeguard Duty, with different rates, in July 2020, indeed qualified as a “Change in Law.” The tribunal highlighted that the duty imposed in 2018 was for two years, whereas the 2020 notification represented a fresh imposition of Safeguard Duty with varied rates. The tribunal’s decision acknowledges that the Safeguard Duty significantly increased project costs for Juniper.
As a result of the tribunal’s decision, Juniper was awarded compensation for the Safeguard Duty and the Integrated Goods and Services Tax (IGST) paid on it. This compensation amounted to approximately ₹38,33,18,557. Furthermore, the tribunal ruled that Juniper was entitled to interest on the SGD and IGST paid.
Interest on Compensation:
The tribunal’s ruling on the entitlement to interest proved to be another key aspect of the case. While the PPA did not explicitly address this issue, the tribunal relied on a previous judgment from the Appellate Tribunal for Electricity, which upheld the payment of carrying costs or interest on amounts due to changes in law.
This decision has significant implications for the solar energy sector in India. It reinforces the principle that changes in law can trigger compensation for solar energy producers and encourage predictability and stability in the sector. The ruling ensures that solar power producers are protected against unforeseen changes in law that might impact project costs.
The Appellate Tribunal’s decision also underscores the importance of clear and comprehensive Power Purchase Agreements in the solar energy sector, which should address compensation for changes in law and provide mechanisms for resolving disputes.
This landmark ruling sets an important precedent for safeguarding the interests of solar energy producers in India. It recognizes that changes in law can significantly impact the viability of solar energy projects and underscores the need for fair compensation to ensure the growth and sustainability of the solar energy sector.
Please read the document below for more details.