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<p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">In a reprieve to power companies across India, the Gujarat High Court on Thursday passed a landmark judgment in a case related to Alstom India, calling the notices issued by the Director General of Foreign Trade (DGFT) for recovery of central excise from non-mega power plants unconstitutional.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Alstom had pleaded that the DGFT being an administrative authority was seeking to legislate by resorting to &ldquo;incorporation by reference&rdquo; of a substantial provision of the law, i.e., the Customs and Central Excise Duty Drawback Rules. It said such a provision strikes at the root of separation of powers between the executive and legislature and is, thus, violative of the basic structure of the Constitution. The Gujarat High Court held that the said provision is unconstitutional.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">This judgement will have far-reaching implications for the power sector as all such recovery notices issued so far would be viewed as lacking the authority of law or, in other words, void ab-initio. This decision will have the force of law across the country until it is reversed by the Supreme Court. The recovery notices to various non-mega power projects issued in the past would become illegal.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">It would also help power players defend all such cases where the order granting duty drawback has been withdrawn pursuant to the aforementioned PIC decision. It would thus bring significant relief for the power sector, which has been facing grave challenges on several accounts, and help it improve its financial health.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Earlier, in March 2011, the DGFT under the aegis of Policy Interpretation Committee (PIC) took several unilateral decisions. One such decision pertained to denial of deemed export drawback on supply of imported as well as domestic plant and machinery for constructing non-mega power plants. Specifically, the PIC interpreted the provisions of the Foreign Trade Policy to hold that deemed export drawback was never available to supplies made to non-mega power projects and, consequently, such benefits ought not to have been granted.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Pursuant to this interpretation, instructions were issued to various authorities subordinate to the DGFT to effect recovery of deemed export drawback granted in the past to several non-mega power projects. Instructions Were also issued to withdraw all formal approvals granted to the sector in the past and to reject all applications in this respect going forward. The decision led to several recovery notices being issued to various non-mega power projects with an express direction of returning the export drawback granted &mdash; at stake were several thousand crore.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">That led to mayhem and concern in the industry, which resulted in filing of multiple writ petitions before various high courts, including the Gujarat HC. Alstom has a hydro business manufacturing facility in Vadodara and is planning to invest INR 100 crore in expansion.</span></span></span></p> <p style="text-align: justify;"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Source-On Request</span></span></span></p>