Rajasthan HC Directs Fresh Review Of Withdrawn Solar Power Duty Exemptions For Pre-2022 Projects

The Rajasthan High Court has delivered an important judgment in a case related to tax exemptions for solar power projects. The matter arose from a dispute between Nirmal Vyas and the Energy Department of the Government of Rajasthan, with UltraTech Cement Limited being a key party involved. The case focused on whether the State government could withdraw an earlier promise of electricity duty exemption given under its solar policy.

UltraTech Cement had set up captive solar power plants in Rajasthan at its Aditya and Kotputli units. The company made an investment of around ₹89 crore based on the State’s Solar Policy, 2019. This policy had clearly promised a seven-year exemption from electricity duty for captive solar projects from the date they started operations. The company argued that it relied on this assurance while planning and executing its investment.

However, the situation changed when the State government issued an amendment on May 10, 2022. Through this amendment, the earlier exemption was withdrawn, and solar power projects were made liable to pay electricity duty. This decision led to legal challenges from the affected parties.

The petitioners argued that the government’s move was unfair and violated the principles of promissory estoppel and legitimate expectation. They said that the policy was not just a general statement but a firm commitment meant to attract investment in the solar sector. By withdrawing the benefit after companies had already invested, the State had disturbed the financial planning of these projects. They also pointed out that other renewable sectors, such as wind energy, were still enjoying stable exemptions, making the decision discriminatory.

On the other hand, the State government defended its action by referring to the Rajasthan Electricity (Duty) Act, 1962. It said that the law gives the government full authority to grant or withdraw exemptions depending on public interest. According to the State, the Solar Policy was only an executive decision and did not have the force of law. Therefore, it could be changed when required. The government also argued that the solar sector had grown significantly and costs had come down, so continuing exemptions would put unnecessary pressure on public finances.

After hearing both sides, the High Court examined the relevant provisions of the 1962 Act, especially Section 3(3), which allows the government to modify exemptions in public interest. While the court accepted that the State has wide powers in financial matters, it also noted that such powers should not be used in a way that harms investors who acted based on clear government promises.

In its final decision, the court did not give a blanket ruling in favor of either side. Instead, it directed the competent authority to review each case individually. The authorities have been asked to verify the actual commissioning dates of the solar plants and then decide, with proper reasoning, whether the seven-year exemption should apply to projects that began operations before the policy was amended.