APTEL Declares Entry Tax A Change In Law, Overturns Telangana Commission Order

The Appellate Tribunal for Electricity (APTEL) delivered an important judgment on April 13, 2026, in favor of ACME Dayakara Solar Power Private Limited, setting aside an earlier order passed by the Telangana State Electricity Regulatory Commission. The case focused on whether the imposition of Entry Tax under the Telangana Tax on Entry of Goods into Local Areas Act, 2001, could be treated as a “Change in Law” under the Power Purchase Agreement (PPA) signed on March 3, 2015.

The dispute started when the Chief Tax Officer issued assessment orders in 2020, asking the company to pay more than ₹6.6 crore as Entry Tax for the financial years 2015-16 and 2016-17. The State Commission had earlier rejected the company’s claim, stating that the developer had agreed to a fixed tariff that included all taxes. It also held that the definition of “Change in Law” in the PPA was limited and did not cover such tax impositions.

However, APTEL disagreed with this interpretation. The Tribunal observed that when the company submitted its bid in 2014, the Entry Tax had already been declared unconstitutional by the Andhra Pradesh High Court. It was only later, in November 2016, that the Supreme Court of India, in the Jindal Stainless Steel case, upheld the validity of such taxes. Because of this, the developer could not have expected or included this tax in its original financial calculations.

The Tribunal also examined the terms of the PPA closely. It pointed out a difference between two clauses. One clause mentioned a fixed “quoted tariff,” while another said that the “tariff payable” would include taxes applicable from time to time. APTEL said that contracts should be interpreted in a practical way that makes business sense. It added that forcing a developer to bear new and unexpected statutory costs after signing the agreement would be unfair.

APTEL further clarified that the term “Change in Law” in the PPA is broad enough to include such situations. It stated that a change in legal position due to a court judgment can also be considered under this category. The Tribunal also referred to the National Tariff Policy 2016, which provides that any change in duties or taxes that affects project costs should normally be allowed as a pass-through unless clearly excluded in the contract.

In its final decision, APTEL set aside the earlier order of the State Commission and declared that the Entry Tax qualifies as a Change in Law event. The matter has now been sent back to the Telangana Commission to calculate the compensation to be given to the company. The Commission has been directed to complete this process and issue the necessary orders within two months.