Delhi High Court Provides Solar Developer Protection Against Retrospective Denial of Concessional Rate of Customs Duty

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

The Project Import Regulations Act of 1986’s registration requirements for the products had previously been met, thus the court ordered the Central Board of Indirect Taxes and Customs (CBIC) Customs Board not to take any further action about the import of goods.

ReNew Hans Urja is building a 600 MW solar power plant in the Rajasthani city of Jaisalmer. It asserted to the Commission that it had the right to import the materials needed for the project at a reduced rate of tariff.

Many companies requested import permits from the Customs department under the Act, which offered a single and reduced rate of customs duty for the majority of the equipment required to establish a power project.

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

However, the Act does not specifically declare that the limitations apply to solar installations. The Act was altered by the government in October to specifically restrict the use of the provisions for solar installations, however, it was unclear whether the modification would take effect going forward or going backward.

However, the Customs Board claimed that as of the notification of October 19, 2022, this entitlement had been revoked.

The solar developer noted that even if the announcement were to be taken at face value, it was expected to take effect on October 20, 2022. It argued that because its solar project had begun before the notice date, it ought to still be qualified for the reduced rate of customs duty. According to the Customs Board, the petitioner did not fulfill the qualifications to be eligible for the reduced rate of duty.

The petitioner argued that the Customs Board’s decision was illegal and had retrospectively infringed on the developer’s rights. The developer added that it has also provided a bank guarantee for Rs. 10 million and an 18.45 billion rupee continuity bond.

The High Court stated that if the developer wasn’t given temporary protection, the entire importation process would fail. ReNew Hans Urja has provided a sizable continuity bond and bank guarantee, according to HC, thus at this stage of the import procedure, no action should be taken against the developer.

The project’s execution may be postponed even though a letter of credit is expected to be provided between March and April 2023 because it is uncertain whether the petitioner will be given a concessional rate of duty or not.