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New Delhi: The Supreme Court on Friday upheld a Gujarat high court decision which quashed a government notification imposing customs duty on electrical power transferred from a special economic zone (SEZ) to the domestic tariff area (DTA).

The top court was hearing a plea filed by the Union finance ministry seeking to levy customs duty on Adani Power Ltd, which operates a power plant in Mundra Port and a SEZ.

The high court in July quashed the validity of the 2010 government notification imposing 16% customs duty as being unconstitutional. The court said there was no legal basis for imposing such a tax.

Taxes levied against companies in SEZs are governed by a special law and cannot be subjected to other taxes.

Electrical energy is exempt from custom duty under the Customs Tariff Act, 1975. “Even if transferring power to a domestic zone is treated as an import to India, an exemption is given under the Customs Act," the company argued in the petition, a copy of which Mint reviewed.

Lawyer K.K. Venugopal, appearing for Adani Power, told the court that the company had already paid 27 crore in customs duty.

A bench headed by chief justice H.L. Dattu also ordered the return of a bank guarantee of 100 crore submitted by the company.

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