Supreme Court of India
NABHA POWER LIMITEDversusPUNJAB STATE POWER CORPORATION LIMITED AND OTHERS
- Citation
- 2025 INSC 1002
- Decided
- 19 August 2025
- Disposal
- Dismissed
Holding
The Court held that the appellants were not entitled to the deemed export benefits under Para 8.3 of the FTP and that the DGFT notifications and the press release did not constitute a “Change in Law”, therefore no compensation is payable.
Summary
Nabha Power Ltd (NPL) and Talwandi Sabo Power Ltd (TSPL) entered into Power Purchase Agreements (PPA) with Punjab State Power Corporation Ltd (PSPCL) for a 700 MW coal‑fired project. They claimed that deemed export benefits under Paragraph 8.3 of the Foreign Trade Policy (FTP) 2009‑2014 were available at the bid cut‑off date and that subsequent DGFT notifications and a Cabinet press release withdrawing those benefits constituted a “Change in Law” under Article 13 of the PPA, entitling them to compensation. The State Commission and the Appellate Tribunal for Electricity held that the benefits were not available and that the notifications were merely clarificatory, not a change in law. On appeal, the Supreme Court examined the statutory definitions of “goods”, “manufacture”, and the procedural prerequisites for FTP benefits, concluding that a power plant is an immovable asset and does not satisfy the FTP’s requirement of supply of movable “goods”. Consequently, the Court held that the appellants were ineligible for the deemed export benefits and that no “Change in Law” occurred, so no restitutionary relief could be awarded. The appeals were dismissed.
Issues considered
- Whether deemed export benefits under Para 8.3 of the Foreign Trade Policy 2009‑2014 were legitimately available to the appellants as of the bid cut‑off date and whether DGFT notifications amount to a “Change in Law” under the PPA.
- Whether the Press Release of Cabinet Decision changing the threshold for deemed export benefits constitutes a “Change in Law” within the meaning of Article 13 of the PPA.
- Whether the appellants are entitled to restitutionary compensation under Article 13.1.1(ii) of the PPA.
Legislation cited
- Central Excise Act, 1944s. 2(f)
- Customs Act, 1962s. 25
- Electricity Act, 2003s. 125, s. 63
- Foreign Trade (Development & Regulation) Act, 1992s. 5
Headnote
1308 : 2025 INSC 1002 Nabha Power Limited v. Punjab State Power Corporation Limited and Others (Civil Appeal No. 8694 of 2017) 19 August 2025 [B.R. Gavai, CJI and Augustine George Masih,* J.] Issue for Consideration Issue arose whether deemed export benefits under Para 8.3 of Foreign Trade under the Power Purchase Agreement dated 18.01.2010; whether the Press Release of Cabinet Decision pertaining to change of threshold of so-deemed export benefits would constitute a “Change in Law” under the PPA; and if so, whether the appellants entitled to restitutionary relief in
Subjects
Deemed export benefitsForeign Trade PolicyBid cut‑off dateDGFT notificationsChange in LawPower Purchase AgreementPress Release Cabinet DecisionRestitutionary reliefCompensationSpecial Purpose VehiclesMega Watt coal‑fired power projectTariff‑Based Competitive BiddingCustoms duty exemptionTerminal Excise DutyDrawback
Judgment
[2025] 8 S.C.R. 1308 : 2025 INSC 1002
Nabha Power Limited
v.
Punjab State Power Corporation Limited and Others
(Civil Appeal No. 8694 of 2017)
19 August 2025
[B.R. Gavai, CJI and Augustine George Masih,* J.]
Issue for Consideration
Issue arose whether deemed export benefits under Para 8.3 of
Foreign Trade Policy 2009-2014-FTP were legitimately available to
the appellants as of the bid cut-off date and would notifications by
Directorate General of Foreign Trade amount to “Change in Law”
under the Power Purchase Agreement dated 18.01.2010; whether
the Press Release of Cabinet Decision pertaining to change of
threshold of so-deemed export benefits would constitute a “Change
in Law” under the PPA; and if so, whether the appellants entitled
to restitutionary relief in the form of compensation.
Headnotes†
Electricity Act, 2003 – ss. 63, 125 – Foreign Trade (Development
& Regulation) Act, 1992 – s.5 read with Paragraph 1.2 of the
FTP – Customs Act, 1962 – Availability of benefits under the
Foreign Trade Policy to power plant as of the cut-off date –
Claim for Deemed Export Benefits, eligibility – Withdrawal
of Foreign Trade Policy Para 8.3 benefits, if constitutes
change in law – Appellants-NPL and TSPL, Special Purpose
Vehicles formulated to develop Mega Watt coal-fired power
project at Rajpura, Punjab, through Tariff-Based Competitive
Bidding, entered into a Power Purchase Agreement with
Punjab State Power Corporation Limited-PSPCL – NPL
sought concessions or exemption from payment of customs
duty while importing capital goods – FTP amended that
Terminal Excise Duty exemptions under the FTP would not
be available for the supplies made to a non-MPP (with cut-off
date being 01.10.2009) – Petition by NPL that the Mega Power
benefits were factored into the bid and hence did not warrant
pass-through to PSPCL, and compensation under Art. 13.1.1(ii)
* Author
[2025] 8 S.C.R. 1309
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
of the PPA for the withdrawal of FTP benefits post the cut off
date of 02.10.2009, alternatively – State Commission dismissed
the Petition holding that since the NPL had elected to avail
benefits under the MPP 2009, it was precluded from claiming
concurrent benefits under the FTP and withdrawal of benefits
by DGFT did not constitute as a “Change in Law” within the
meaning of Art. 13 of the PPA – Appellate tribunal also rejected
the claims by the NPL and primarily the challenge to the
post-bid withdrawal of fiscal incentives which were allegedly
available earlier under the FTP and their classification as a
“Change in Law” event under the PPA – Interference with:
Held: Not called for – Press Release dated 01.10.2009 would
neither amount to “law” within the meaning conceptualized in
the PPA, as it would only be the Notifications dated 11.12.2009
and 14.12.2009 that would have amounted to “law”, nor it would
thereby amount to “Change in Law” – Essential prerequisites
that ought to be satisfied by the appellants in order to be eligible
for the deemed export benefits are the claim for Deemed Export
Benefits relates exclusively to “goods” and is inapplicable to any
other thing which is not “goods”, such goods, though supplied,
do not physically exit the territorial boundaries of the country;
that the goods to be supplied must be “manufactured in India”;
that there must be an act constituting “supply of goods” to the
power projects for the project to claim Deemed Export Benefits;
that the act of “supply of goods” is either by the main contractor
and/or the sub-contractor to the concerned power project; and the
supply is undertaken strictly in accordance with the procedural
framework prescribed under ICB – Embedded power plant of
hundreds of Mega Watts would not be able to qualify as “capital
goods” for entitlement of the appellants under the FTP for the
deemed export benefits – Para 9.36 of the FTP requires that the
manufactured good should have been brought into existence with
a distinctive name, character, or use, such a feasibility impossible
when it comes to the concerned power plants – Supply of goods”
to a power plant, as is contemplated u/Para 8.2(g) of the FTP
remains unfulfilled – Even at the time of bidding, the to-be then
constructed Power Plant itself was deemed as the concerned
capital goods for the deemed export benefits, implying that there
was no distinct supply of goods by either a main contractor or a
sub-contractor thereof – Such a situation of suo moto acclaimed
manufacturing in the Project’s own right shall not stand the instant
1310 [2025] 8 S.C.R.
Supreme Court Reports
test – Appellants, failed to establish the procurement of “supply of
goods” as per the mandate of ICB either at the stage of Independent
Power Producer or Engineering Procurement Contract, owing
to the fact that such procurement of the components was done
through directly entering into contract with their subsidiaries or
joint venture or related companies – Thus, the appellants not
entitled to the deemed export benefits under Para 8.3 of the FTP
for their inability to fulfil the essentail prerequisites – Plea as to
the alleged withdrawal of the said benefits through notifications of
DGFT dated 28.12.2011 and 21.03.2012 collectively and whether
that would amount to a “Change in Law” as per Art. 13 of the PPA
not delved into – Said notifications issued through DGFT mere
clarificatory in nature – No interpretation of law was undertaken
prior to the cut-off date to the effect that a developer shall be
able to import goods to be assembled into a power plant and also
claim the deemed export benefits on those, thus, tribunal correctly
concluded the said circulars to be merely clarificatory and not as
something which has either changed or introduced something
new, being allegedly oppressive towards the appellants – In view
thereof, appellants not entitled to restitutionary relief in the form
of compensation. [Paras 44, 57-62, 67-80]
Case Law Cited
Nabha Power Limited and Another v. Punjab State Power
Corporation Limited and Another [2024] 11 SCR 445 : (2025) 5
SCC 353 – relied on.
Shivshankara and Another v. H.P. Vedavyasa Char [2023] 6 SCR
359 : (2023) 13 SCC 1; Haryana Power Purchase Centre v. Sasan
Power Limited and Others [2023] 8 SCR 1 : (2024) 1 SCC 247;
GMR Warora Energy Limited v. Central Electricity Regulatory
Commission (CERC) and Others [2023] 8 SCR 183 : (2023) 10
SCC 401; Nabha Power Limited (NPL) v. Punjab State Power
Corporation Limited (PSPCL) and Another [2017] 14 SCR 301 :
(2018) 11 SCC 508; Babu Verghese and Others v. Bar Council
of Kerala and Others [1999] 1 SCR 1121 : (1999) 3 SCC 422;
Vadilal Chemicals Ltd. v. State of A.P. and Others [2005] Supp. 2
SCR 1 : (2005) 6 SCC 292; MSCO. Pvt. Ltd. v. Union of India and
Others [1985] 1 SCR 1146 : (1985) 1 SCC 51; Trutuf Safety Glass
Industries v. Commissioner of Sales Tax, U.P. [2007] 8 SCR 860 :
(2007) 7 SCC 242; P.C. Cheriyan v. Mst. Barfi Devi [1980] 1 SCR
961 : (1980) 2 SCC 461; Quality Steel Tubes (P) Ltd v. Collector of
[2025] 8 S.C.R. 1311
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
Central Excise, U.P. [1994] Supp. 6 SCR 439 : (1995) 2 SCC 372;
Union of India and Another v. Delhi Cloth and General Mills Co. Ltd.
[1963] Supp. 1 SCR 586 : 1962 SCC OnLine SC 148; Collector
of Central Excise, Baroda v. Ambalal Sarabhai Enterprises (P)
Ltd. [1989] 3 SCR 784 : (1989) 4 SCC 112; Union Carbide India
Limited v. Union of India and Others [1986] 2 SCR 162 : (1986)
2 SCC 547; India Cine Agencies v. Commissioner of Income Tax,
Madras [2008] 15 SCR 1122 : (2008) 17 SCC 385; Commissioner
of Income Tax, Orissa and Others v. M/s N.C. Budharaja and
Company and Others [1993] Supp. 2 SCR 185 : (1994) Supp.
1 SCC 280; Moti Laminates Pvt. Ltd. and Others v. Collector of
Central Excise, Ahmedabad [1995] 2 SCR 81 : (1995) 3 SCC 23;
Union Carbide India (supra), Bhor Industries Limited, Bombay v.
Collector of Central Excise, Bombay [1989] 1 SCR 382 : (1989)
1 SCC 602; Hindustan Polymers v. Collector of Central Excise
[1989] 3 SCR 974 : (1989) 4 SCC 323 – referred to.
Commissioner of Income-Tax v. Geo Tech Foundation &
Constructions (2000) 241 ITR 90 : 1999 SCC OnLine Ker 341 –
referred to.
Books and Periodicals Cited
P. Ramanatha Aiyar’s Advanced Law Lexicon Fifth Edition; Supreme
Court Words and Phrases by Surendra Malik and Sumit Malik
Third Edition – referred to.
List of Acts
Electricity Act, 2003; Foreign Trade (Development & Regulation)
Act, 1992; Customs Act, 1962; Central Excise Act, 1944.
List of Keywords
Deemed export benefits; Foreign Trade Policy; Bid; Cut-off date;
Notifications by Directorate General of Foreign Trade; Change
in Law; Power Purchase Agreement; Press Release of Cabinet
Decision; Restitutionary relief; Compensation; Special Purpose
Vehicles; Mega Watt coal-fired power project; Tariff-Based
Competitive Bidding; Punjab State Power Corporation Limited-
PSPCL; Exemption from payment of customs duty; Importing
capital goods; Terminal Excise Duty exemptions; Drawback; Mega
Power benefits; Post-bid withdrawal; Fiscal incentives; Supply of
goods; “Capital goods”.
1312 [2025] 8 S.C.R.
Supreme Court Reports
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8694 of 2017
From the Judgment and Order dated 04.07.2017 of the Appellate
Tribunal for Electricity at New Delhi in AN No. 47 of 2015
With
Civil Appeal No. 8739 of 2017
Appearances for Parties
Advs. for the Appellant:
C.S. Vaidyanathan, A.N.S. Nadkarni, Arvind Datar, Sr. Advs.,
Mahesh Agarwal, Shri Venkatesh, Rohan Talwar, Shashwat Singh,
Ms. Priya Dhankar, Naman Agarwal, E. C. Agrawala, Vishrov
Mukerjee, Pratyush Singh, Raghav Malhotra, Ms. Juhisenguttuvan,
Pranav Bansal, Rahul Khurana, Kumar Visalaksh, M/s. Trilegal.
Advs. for the Respondents:
M G Ramachandran, Balbir Singh, Sr. Advs., Mrs. Poorva Saigal,
K.V. Mohan, Mrs. Pallavi Saigal, Ms. Shirin Gupta, Rishabh Saxena,
Subhan Arya, Aneesh Bajaj, Ms. Srishti Khandaria, Ms. Sunieta
Ojha, Ms. Gargi Kumar.
Judgment / Order of the Supreme Court
Judgment
Augustine George Masih, J.
1. These two appeals pertain to the following common questions of law:
(i) Whether deemed export benefits under Para 8.3 of Foreign
Trade Policy 2009-2014 (hereinafter “FTP”) were legitimately
available to the Appellants as of the bid cut-off date and would
notifications by Directorate General of Foreign Trade (hereinafter,
“DGFT”) amount to “Change in Law” under the Power Purchase
Agreement dated 18.01.2010 (hereinafter, “PPA”);
(ii) Whether the Press Release of Cabinet Decision pertaining
to change of threshold of so-deemed export benefits would
constitute a “Change in Law” under the PPA; and
(iii) If so, whether Appellants are entitled to restitutionary relief in
the form of compensation.
[2025] 8 S.C.R. 1313
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
2. The Civil Appeal No. 8694 of 2017 as filed by the Nabha Power
Limited (hereinafter, “NPL”) under Section 125 of the Electricity Act,
2003 (hereinafter, “EA 2003”), arises from the Common Judgment
dated 04.07.2017 (hereinafter, “Impugned Judgment”) in Appeal
No. 47 of 2015 passed by the Appellate Tribunal for Electricity,
New Delhi (hereinafter, “APTEL”) owing to rejection of the claim(s)
moved by the NPL for relief under Article 13 of the PPA executed
by it with the Punjab State Power Corporation Limited (hereinafter
“PSPCL”), and primarily the challenge to the post-bid withdrawal of
fiscal incentives which were allegedly available earlier under the FTP
and their classification as a “Change in Law” event under the PPA.
3. Similarly, Civil Appeal No. 8739 of 2017, filed by the Talwandi Sabo
Power Limited (hereinafter, “TSPL”) also arises from the same
Impugned Judgment in Appeal No. 32 of 2015 by APTEL. Since
both of the aforesaid appeals before the APTEL involved common
issues, they were heard together. The prime grievance for both the
Appellants therein was that the Punjab State Electricity Regulatory
Commission at Chandigarh (hereinafter, “State Commission”) had,
although vide separate orders, held them to be not eligible for the
aforementioned benefits and liable to pass on the same to PSPCL,
Respondent No. 01 herein.
4. Both, NPL and TSPL, are Special Purpose Vehicles (hereinafter,
“SPVs”) which were formulated to develop the concerned power
projects. This was done under Section 63 of the EA 2003 through
Tariff-Based Competitive Bidding. PSPCL is one of the successors
of the Punjab State Electricity Board (hereinafter, “PSEB”) and is a
state-owned generating and distributing company in Punjab.
5. Since both these appeals arise out of the same Impugned Judgment
with issues being common, the same are being dealt with together.
We shall refer and adopt facts from the Civil Appeal No. 8694 of
2017 as preferred by NPL, treating it to be the main appeal.
6. The NPL was incorporated on 25.09.2007 by PSEB to develop
a dual 700 Mega Watt coal thermal power project at Rajpura in
Punjab (hereinafter, “Project”). While the PSEB was unbundled, 100
percent of the shares of the NPL were acquired by the Respondent
No. 03, being L&T Power Development Limited (hereinafter, “L&T”)
through the bidding process initiated on 10.06.2009, with final date
of bid submission being 09.10.2009, and after an evaluation of the
1314 [2025] 8 S.C.R.
Supreme Court Reports
technical and financial bids by a committee chaired by the Principal
Secretary, Department of Power, Government of Punjab. Thereby,
NPL became a wholly owned subsidiary of L&T. Consequently, the
PPA was executed between NPL and PSPCL.
7. In the interregnum, the Government of India, exercising its powers
under Section 5 of the Foreign Trade (Development & Regulation)
Act, 1992 (hereinafter “FTP Act 1992”) read with Paragraph 1.2 of
the FTP, notified the Foreign Trade Policy, 2009-2014 (hereinafter,
“FTP”), on 27.08.2009. Moreover, the Union Cabinet vide its Decision
dated 01.10.2009 reduced the threshold qualification as a Mega
Power Project to 500 Mega Watt from 1,000 Mega Watt for single
location projects under the Mega Power Policy, 2006 (hereinafter,
“MPP 2006”). On the same date, there was a press release by
the Press Information Bureau that the Union Cabinet has taken a
decision that it is not mandatory for an inter-state sale of power from
a project to be eligible under the MPP 2006 (hereinafter, “Press
Release dated 01.10.2009”).
8. This Decision dated 01.10.2009 led to two changes:
(i) Amendment of the existing eligibility criteria of being a MPP as
set out under Entry 400 of the Principal Customs Notification No.
21 of 2002 dated 01.03.2002 by the Department of Revenue,
Ministry of Finance, Government of India through its powers
under Section 25 of the Customs Act, 1962 (hereinafter, “CA
1962”);
(ii) Issuance of Memorandum No. A-118/2003-IPC modifying the
MPP (hereinafter, “MPP 2009”).
9. It is pertinent to note that it was only through Notifications Nos.
91/2009-Cus dated 11.12.2009 and 92/2009-Cus dated 14.12.2009
that the aforesaid benefits were brought into effect.
10. In pursuance of the same, NPL sought grant of status as a Mega
Power Project from Ministry of Power, Government of India, which
was granted to it on 30.07.2010.
11. For its application to obtain an Essentiality Certificate from the
Department of Energy, Government of Punjab, NPL sought a
recommendation from PSPCL to the effect that Essentiality Certificate
be issued to NPL for seeking concessions or exemption from payment
of customs duty while importing capital goods. Against this, NPL
[2025] 8 S.C.R. 1315
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
gave an undertaking vide Affidavit dated 23.05.2011 that any benefits
which shall accrue on NPL for its change of status to a Mega Power
Project, shall be passed on to PSPCL. The Essentiality Certificate
was thereafter issued on 13.06.2011.
12. Another agony came for the Appellant when the Directorate General of
Foreign Trade (hereinafter, “DGFT”) convened a Policy Interpretation
Committee (hereinafter, “PIC”) on 15.03.2011, which opined that
Terminal Excise Duty exemptions under the FTP would not be
available for the supplies made to a non-MPP (with cut-off date being
01.10.2009) and any such duty shall not be refunded in any manner
including as a drawback under Paragraph 8.3(b) of the FTP. It further
clarified that if a Bill of Entry is in the name of a project authority, the
deemed export benefits would not be made available. To effectuate
the same, Public Notices dated 27.04.2011 and 28.04.2011 were
issued under the FTP Act 1992, amending the FTP.
13. Since the legalities had made NPL ineligible for the assumed
benefits on their end, it moved Petition No. 30 of 2012 before the
State Commission seeking (a) a declaration that the Mega Power
benefits were factored into the bid and hence did not warrant pass-
through to PSPCL, and (b) compensation under Article 13.1.1(ii) of
the PPA for the withdrawal of FTP benefits post the cut-off date of
02.10.2009, alternatively.
14. The State Commission, while dismissing the Petition vide Order
dated 12.11.2012 (hereinafter, “First Order of Commission”), held
that since the NPL had elected to avail benefits under the MPP
2009, it was precluded from claiming concurrent benefits under the
FTP. Moreover, withdrawal of benefits by DGFT did not constitute
as a “Change in Law” within the meaning of Article 13 of the PPA.
15. Assailing the findings of the State Commission, NPL moved Appeal
No. 29 of 2013 before APTEL, which, in its Order dated 30.06.2014
(hereinafter, “First Order of APTEL”), remanded the matter to the
State Commission for reconsideration of the issue on the FTP. It
directed the State Commission to also ascertain and opine as to
whether the benefits under the FTP were available to the NPL as
on the cut-off date.
16. On remand, the State Commission vide its majority opinion
culminating in its Order dated 16.12.2014 (hereinafter, “Second
Order of Commission”) in Petition No. 30 of 2012 reiterated its earlier
1316 [2025] 8 S.C.R.
Supreme Court Reports
conclusions, observing that the benefits of the FTP were neither
available to NPL as on the cut-off date nor their withdrawal attract
the consequences of “Change in Law”. It further went on to observe
that NPL had not produced contemporaneous DGFT endorsements
to substantiate its eligibility to claim FTP benefits under Para 8.3.
Not only that, but as per their own Affidavit dated 23.05.2011, NPL
was to mandatorily pass on the benefits accrued under the MPP
2009 to the PSPCL.
17. Aggrieved from the reaffirmation of the findings by the State
Commission in Second Order of Commission, the NPL again moved
APTEL in Appeal No. 47 of 2015. It asserted that at the time of
bidding, deemed export benefits were not only in force but also
factored into the financial modelling and tariff computation. Also,
that the said benefits were not withdrawn until the Public Notices of
April 2011 on behalf of DGFT, which postdated the bid submission
and execution of the PPA. Furthermore, relying on the DGFT’s
Policy Circular No. 39 of 2000 and the minutes of the PIC meeting
dated 15.03.2011, it asserted that it had a legitimate expectation
that deemed export benefits under Para 8.3 of the FTP would be
available. Accordingly, NPL contended that the sudden withdrawal of
the said benefits arguably resulted in material escalation of project
costs and thereby fell within the “Change of Law” clause of the PPA.
18. On the other hand, PSPCL, challenging the above contentions of
the NPL, submitted that the benefits under FTP Para 8.3 were never
intended for immovable infrastructure like thermal power plants and
that the FTP, by its very nature, was framed to promote exports of
manufactured goods and, accordingly, extended benefits to goods that
were exported or supplied against foreign exchange earnings or to
specified projects under International Competitive Bidding (hereinafter,
“ICB”). Since a thermal power plant constructed in-situ did not meet
the definitional threshold of “goods” or “manufacture” under the FTP
or law(s) on central excise, therefore, NPL’s reliance on deemed
export provisions was misplaced. PSPCL further contended that the
DGFT circulars did not carry the force of law and any withdrawal of
benefits thereunder did not amount to legislative change warranting
relief under Article 13 of the PPA.
19. The APTEL referred to the definitions of the terms “manufacture,”
“manufactured goods” and “deemed exports” under the FTP as
well as the Central Excise Act, 1944 (hereinafter, “CEA 1944”) and
[2025] 8 S.C.R. 1317
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
observed that the FTP was expressly designed to incentivize domestic
production of movable goods for export or deemed export and the
concept of “goods” under the statute denoted a tangible and movable
property, subject to classification under the Customs Tariff. Therefore,
a generating station, as in the instant case, comprising of turbines,
boilers, auxiliaries and associated civil works, was nevertheless an
integrated, immovable asset assembled on‑site and did not, as a
whole, constitute a manufactured good capable of being exported
under the FTP. An attempt to sever individual components to obtain
the relief of deemed export is inconsistent with the scheme of the
statute, requiring the final product shipped or deemed to be shipped
to a buyer outside the jurisdiction of India. Observing that the NPL’s
reliance on Para 8.3 was based on misconstrued interpretation of
the letter as well as the spirit of the regime, it held that said fiscal
incentives were inherently inapplicable to an in‑situ coal‑based
thermal power plant.
20. To examine whether the Public Notices dated 27.04.2011 and
28.04.2011 constituted a “Change in Law” under Article 13 of the
PPA, APTEL while perusing the language of Article 13 clarified that
Article 13.1.1(ii) extended to “any change in law” affecting “taxes,
duties, cesses, levies, fees and charges” which altered the cost to
the seller of performing its obligations. The NPL had contended that
withdrawal of deemed export benefits, though effected by said Public
Notices rather than a parliamentary enactment, was indisputably
a change in the law or law‑making process, and that the resulting
increase in capital cost which engaged the “Change in Law” provision
was rejected by APTEL observing that the said clause had only
envisioned a legislation and/or a statutory enactment in form of
a regulation by a competent authority. Therefore, the said Public
Notices were merely administrative policy instruments, not meeting
the threshold of “Change in Law”. It further opined that while the said
Notices might have affected the cost of NPL, the remedy doesn’t lie
as a contractual relief under the PPA, but judicial review of the said
administrative action.
21. Reviewing the satisfaction of the procedural thresholds by NPL under
Article 13 of the PPA, namely, timely notice for the alleged “Change
in Law” event, and quantification of the impact on tariff owing to the
said event, APTEL observed that while NPL reserved its right vide
the Affidavit dated 23.05.2011, it never pursued any reference to
1318 [2025] 8 S.C.R.
Supreme Court Reports
confirmation of the eligibility of said benefits under the FTP, either by
the Central Government or by DGFT. Such a belated invocation of
Article 13 of the PPA, without a binding interpretation, would ascertain
that NPL failed to discharge the onus to demonstrate that a “Change
in Law” event had occurred. Furthermore, it is to be considered
that neither the claim for additional cost was substantiated nor PPA
envisaged restoration of benefits.
22. Apparently being disconsolate from the concurrent findings against
them, NPL moved the Civil Appeal No. 8694 of 2017 before this
Court. NPL has reiterated its grievances.
23. Primarily, NPL has asserted that APTEL erred in holding that the
deemed export benefits under Para 8.3 of the FTP were never
available to a coal‑based thermal power plant assembled in‑situ.
The grounds, as raised in the instant Civil Appeal plead that both
the statutory text and DGFT circulars envisaged relief on individual
capital‑goods components, which collectively form the “goods”
supplied to the project under ICB. It further submits that the APTEL’s
narrow reading of “manufactured goods” contravenes the plain
language of the FTP and the FTP Act 1992, which defines “deemed
exports” by reference to supply to specified end‑users rather than
physical shipment of entire power stations abroad.
24. It went on to further contend that APTEL misconstrued the “Change
in Law” clause by restricting its scope to parliamentary enactments
and delegated legislation. The grounds elaborate that Article 13.1.1(ii)
expressly extends to “any change in any law,” a phrase wide enough
to include executive notifications issued under statutory authority,
which alter duties, levies or benefits. Moreover, the Public Notice
dated 27.04.2011 and 28.04.2011, issued pursuant to powers under
the FTP Act 1992, are thus argued to be legislative in character and
binding, triggering contractual relief.
25. Additionally, NPL avers that Impugned Judgment overlooked its
legitimate expectation, cultivated by DGFT practice and minutes
of the PIC Meeting dated 15.03.2011, that deemed export benefits
under Para 8.3 of the FTP would subsist until formally rescinded. By
refusing to quantify loss on the basis of contemporaneous tariff models
and the record of actual procurement, the State Commission is also
said to have abdicated its duty to enforce the economic equilibrium
principle fundamental to Article 13. It also faults the APTEL’s finding
[2025] 8 S.C.R. 1319
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
on procedural non‑compliance, pointing out that timely notice was
given and that the quantification of incremental costs, derived from
pre‑bid financial schedules, was neither speculative nor premature.
26. Also, adopting their contentions before the State Commission and
APTEL, NPL has put forth that while formulating its bid, it had factored
in two critical streams of fiscal incentives available under distinct
schemes: (i) the Mega Power Policy, which promised concessional
customs duty and full exemption from excise duties for thermal power
projects exceeding 1,000 Mega Watt; and (ii) the benefits under Para
8.3 of the FTP were applicable to deemed exports, including Advance
Authorization, Deemed Export Drawback, and exemption from
Terminal Excise Duty on procurement of domestically manufactured
capital goods. While the former pertained specifically to recognized
MPPs, the latter applied to non-Mega Projects executing contracts
under ICB. As on the bid date, the Project did not have formal
MPP status, and hence, the bid was premised on the availability
of benefits under the FTP. Concluding, NPL, relying on the maxim
contemporanea expositio, referred to the benefits granted to others,
allegedly similarly placed Projects and contended that contemporary
interpretation should be adopted.
27. In its Counter Affidavit dated 12.09.2017, PSPCL comprehensively
refutes NPL’s claim that the withdrawal of FTP Para 8.3 benefits
constitutes a “Change in Law” event warranting contractual
compensation. PSPCL first underscores that the FTP incentive
scheme was designed exclusively for “goods”, being tangible,
movable items, as classifiable under the Customs Tariff Schedule,
and not for immovable assets such as power plants. Referring to the
legislative history of the FTP and definitions under the CEA 1944,
which repeatedly distinguish between supply of goods for export and
installation of infrastructure projects on-site, it sought to demonstrate
that policy makers never contemplated deemed export benefits for
entire power stations. It further emphasized that any interpretation
extending relief to generating assets would render incoherent the
statutory regime of export‑linked incentives.
28. Supplementing the aforesaid contentions, PSPCL asserts that
NPL’s invocation of Article 13 is both contractually and procedurally
flawed, stressing that the PPA draws a clear line between benefits
under the MPP and those under the FTP, and that NPL’s election
1320 [2025] 8 S.C.R.
Supreme Court Reports
to opt for concessions under the MPP 2009, confirmed by its own
Affidavit dated 23.05.2011, precludes a second bite at the cherry. The
Counter Affidavit additionally characterizes NPL’s protest reservation
as mere lip service, asserting that no synchronous decision or order
by the DGFT had ever recognized NPL’s eligibility to benefits under
Para 8.3 of the FTP.
29. On the “Change in Law” issue, PSPCL argues that only statutory
enactments or delegated legislation under the FTP Act 1992 qualify,
and that administrative notices, lacking the force of regulation,
cannot be contractual triggers. Finally, PSPCL submits that NPL’s
cost‑impact calculations are hypothetical, relying on benefit rates
that were never certified by DGFT, and that benefits, if any, must
be sought through statutory appeals rather than by recourse to the
PPA’s “Change in Law” clause.
30. In its Rejoinder dated 15.11.2017, NPL insists that the Counter
Affidavit dated 12.09.2017 misconceives both the factual matrix and
the legal contours of the “Change in Law” provision. It reiterates that
the statutory framework of the FTP contemplates deemed export
treatment for capital goods supplied under ICB, irrespective of physical
export, and that numerous circulars by DGFT and meetings of PIC
had long signalled such availability. The Rejoinder emphasizes that
the PIC meeting dated 15.03.2011 and the Public Notices dated
27.04.2011 and 28.04.2011 are legislative in character, having been
issued under rule‑making powers conferred by the Parliament, and
thus squarely fall within the ambit of Article 13.
31. Addressing PSPCL’s argument on estoppel, it asserts that its Affidavit
dated 23.05.2011 was executed under protest and duress, simply to
obtain MPP status, and cannot be construed as a waiver of separate
FTP entitlements, further contending that it had repeatedly sought
clarification from DGFT, within the period between bid submission
and execution of the PPA, but was left in regulatory limbo until April
2011. Regarding quantification, NPL has provided detailed schedules
showing incremental capital cost computed at the exact FTP rates
in force on the cut‑off date, thereby demonstrating a concrete,
non‑speculative loss.
32. The Rejoinder dated 15.11.2017 also challenges PSPCL’s attempt
to assert a narrow interpretation of “law”, arguing that executive
notifications issued under statutory authority are binding legal
[2025] 8 S.C.R. 1321
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
instruments and that contractual remedies for their withdrawal are
expressly provided in Article 13. Concluding, it also urged that
the sanctity of competitive bidding and the doctrine of equitable
adjustment demand that PSPCL bear the financial burden of a post‑bid
policy reversal for which NPL could not have planned.
33. Through detailed references, as raised by all the Senior Advocates
before us, we have been able to peruse all the submissions at
length, including all the material on record through their assistance,
inclusive of the Impugned Judgment.
34. We shall first deal with the issue as to whether the notifications by
Directorate General of Foreign Trade and Press Release of a Cabinet
Decision pertaining to change of threshold so-deemed export benefits
would constitute a “Change in Law” under the PPA.
35. Before we delve into the submission by the parties to this effect and
the analysis thereof, it is critical to refer the PPA as executed by
the parties, especially Article 13 of the PPA, which reads as follows:
“ARTICLE 13: CHANGE IN LAW
13.1. Definitions
In this Article 13, the following terms shall have the following
meanings:
13.1.1 “Change in Law” means the occurrence of
any of the following events after the date, which is
seven (7) days prior to the Bid Deadline:
(i) the enactment, bringing into effect, adoption,
promulgation, amendment, modification or
repeal, of any Law or (ii) a change in interpretation
of any Law by a Competent Court of law,
tribunal or Indian Governmental Instrumentality
provided such Court of law, tribunal or Indian
Governmental Instrumentality is final authority
under law for such interpretation or (iii) change
in any consents, approvals or licenses available
or obtained for the Project, otherwise than for
default of the Seller, which results in any change
in any cost of or revenue from the business of
selling electricity by the Seller to the Procurer
1322 [2025] 8 S.C.R.
Supreme Court Reports
under the terms of this Agreement or (iv) any
change in the (a) Declared Price of Land for
the Project or (b) the cost of implementation of
the resettlement and rehabilitation package of
the land for the Project mentioned in the RfP
or (c) the cost of implementing Environmental
Management Plan for the Power Station (d)
Deleted
but shall not include (i) any change in any
withholding tax on income or dividends
distributed to the shareholders of the Seller, or
(ii) change in respect of UI Charges or frequency
intervals by an Appropriate Commission.
13.1.2 ‘Competent Court’ means:
The Supreme Court or any High Court or any
tribunal or any similar judicial or quasi-judicial
body in India that has jurisdiction to adjudicate
upon issues relating to the Project.
13.2. Application and Principals for computing impact
of Change in Law
While determining the consequence of Change in Law
under this Article 13, the Parties shall have due regard to
the principle that the purpose of compensating the Party
affected by such Change in Law, is to restore through
Monthly Tariff payments, to the extent contemplated in
this Article 13, the affected Party to the same economic
position as if such Change in Law has not occurred.
a) Construction Period
As a result of any Change in Law, the impact of
increase/decrease of Capital Cost of the Project in the
Tariff shall be governed by the formula given below:
For every cumulative increase/ decrease of
each Rupees 16,50,00,000/- (Rupees Sixteen
crore fifty lakhs) in the Capital Cost over the
term of this Agreement, the increase/decrease
[2025] 8 S.C.R. 1323
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
in Non Escalable Capacity Charges shall be
an amount equal to 0.267% (percentage zero
point two six seven) of the Non Escalable
Capacity Charges. Provided that the Seller
provides to the Procurer documentary proof
of such increase/ decrease in Capital Cost for
establishing the impact of such Change in Law.
Jn case of Dispute, Article 17 shall apply.
It is clarified that the above mentioned
compensation shall be payable to either Party,
only with effect from the date on which the total
increase/decrease exceeds amount of Rupees
16,50,00,000/- (Rupees Sixteen crore fifty
lakhs).
b) Operation Period
As a result of Change in Law, the compensation for
any increase/decrease in revenues or cost to the
Seller shall be determined and effective from such
date, as decided by the Appropriate Commission
whose decision shall be final and binding on both
the Parties, subject to rights of appeal provided
under applicable Law.
Provided that the above mentioned compensation
shall be payable only if and for increase/ decrease
in revenues or cost to the Seller is in excess of an
amount equivalent to 1% of the Letter of Credit in
aggregate for a Contract Year.
13.3. Notification of Change in Law
13.3.1. If the Seller is affected by a Change in Law
in accordance with Article 13.2 and wishes
to claim a Change in Law under this Article,
it shall give notice to the Procurer of such
Change in Law as soon as reasonably
practicable after becoming aware of the
same or should reasonably have known
of the Change in Law.
1324 [2025] 8 S.C.R.
Supreme Court Reports
13.3.2. Notwithstanding Article 13.3.1, the Seller
shall be obliged to serve a notice to the
Procurer under this Article 13.3.2 if it
is beneficially affected by a Change in
Law. Without prejudice to the factor of
materiality or other provisions contained in
this Agreement, the obligation to inform the
Procurer contained herein shall be material.
Provided that in case the Seller has not
provided such notice, the Procurer shall have
the right to issue such notice to the Seller.
13.3.3. Any notice served pursuant to this Article
13.3.2 shall provide, amongst other things,
precise details of:
(a) the Change in Law; and
(b) the effects on the Seller of the matters
referred to in Article 13.2.
13.4. Tariff Adjustment Payment on account of Change
in Law
13.4.1. Subject to Article 13.2, the adjustment in
Monthly Tariff Payment shall be effective
from:
(i) the date of adoption, promulgation,
amendment re-enactment or repeal of the
Law or Change in Law; or
(ii) the date of order/judgment of the
Competent Court or tribunal or Indian
Governmental Instrumentality, if the
Change in Law is on account of a change
in interpretation of Law.
13.4.2. The payment for Changes in Law shall be
through Supplementary Bill as mentioned
in Article 11.8. However, in case of any
change in Tariff by reason of Change in
Law, as determined in accordance with this
[2025] 8 S.C.R. 1325
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
Agreement, the Monthly Invoice to be raised
by the Seller after such change in Tariff shall
appropriately reflect the changed Tariff.”
36. A contention is raised on behalf of the learned Senior Advocates
for the Appellants that the Request for Proposal and the contractual
framework between the parties as a whole clearly set a cut-off date for
“Change in Law” under the Article 13 of the PPA and required them
to deem all the prevailing laws, regulations, and their interpretations
thereof to have been factored in the bidding process and the price
thereof. It is accordingly contended that “law” included not only the
statutory texts from the wisdom of the legislature but also any such
authoritative interpretations of the law by an “Indian Government
Instrumentality”, which they press DGFT to be one.
37. Moreover, arguing that similar benefits were given under FTP to MPP
and non-MPP projects and to substantiate, reliance was placed on
equivalent benefits being given to 144 other projects, implying settled
nature of law. Alternatively, it is also argued that this interpretation
was altered through the PIC dated 15.03.2011, and subsequently,
led to withdrawing the benefits under Para 8.3(a) and (b) of the
FTP for non-MPP altogether. Such an act would, the Appellants
contend, constitute “Change in Law”, owing to the modifications to
the existing entitlements.
38. Assailing the orders of the State Commission as well as the APTEL, it
is also pressed that those forums erroneously only dealt with whether
the Appellants satisfied the conditions under the FTP as opposed to
the legality as to whether the said benefits were available as on the
cut-off date, thereby committing of a jurisdictional error on their part by
expanding the scope of the remand, being in contradiction to the law
laid down in Shivshankara and Another v. H.P. Vedavyasa Char1.
Relying on the decision of this Court in Haryana Power Purchase
Centre v. Sasan Power Limited and Others2, it is further argued that
the best material to establish that whether a project was exempted
from the concerned duties as on the cut-off would be instances of
other similarly placed project where goods were also treated to be
exempt under the instant FTP.
1 (2023) 13 SCC 1
2 (2024) 1 SCC 247
1326 [2025] 8 S.C.R.
Supreme Court Reports
39. On the other hand, the Respondents had relied on decision of
this Court in GMR Warora Energy Limited v. Central Electricity
Regulatory Commission (CERC) and Others3 to substantiate their
claim for “Change in Law” through withdrawal of deemed export
benefits through circulars of Ministry of Commerce and Industry as
well as the Notification dated 28.12.2011. This contention is also
rebutted by the Appellants claiming that the same is not applicable
in the present case for having a varied factual matrix.
40. Whether the Press Release of Cabinet Decision pertaining to change
of threshold of so-deemed export benefits constitutes a “Change
in Law” under the PPA, an issue-at-hand, has been substantively
dealt as part of decision of this Court in Nabha Power Limited
and Another v. Punjab State Power Corporation Limited and
Another4 wherein the question before this Court, arising from the
same PPA and an equivalent dispute, was the juxtaposition of the
MPP and the Press Release dated 01.10.2009. Therein, the 3-Judge
Bench of this Court went on to observe that the fulcrum of the claim
of the Appellant therein is anchored in the assertion that the Press
Release dated 01.10.2009 was not merely a policy statement but a
clear indication of an imminent shift in the regime of law governing
the field. Appellant therein also claimed the said Press Release
swayed its bid dated 09.10.2009 in terms of the incorporation of
the deemed benefits and thereby created a legitimate expectation
that the proposed exemptions would come into force, forming a vital
part of the risk calculus vis-à-vis structuring of its bid amount. The
Respondent therein went on to contend that no “Change in Law”
occurred until the publication of Notification Nos. 91/2009-Cus and
92/2009-Cus dated 11.12.2009 and 14.12.2009 respectively, implying
that no expectation raised by the Appellant therein could be said to
have been crystallised.
41. Answering the query, the Bench while placing reliance on earlier
decisions of this Court, observed that the golden rule, as applicable
on contractual interpretation, mandates that the words should be
given their ordinary and grammatical meaning and should not depart
from the mandate to avoid either absurdity or repugnancy, even the
3 (2023) 10 SCC 401
4 (2025) 5 SCC 353
[2025] 8 S.C.R. 1327
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
business efficacy test, for which the jurisprudence was reiterated and
outlined in Nabha Power Limited (NPL) v. Punjab State Power
Corporation Limited (PSPCL) and Another5, cannot override an
express term. While analysing the PPA, this Court elaborated that
while Article 1.1 of the PPA elaborated “law” to include statutes,
regulations, notifications, orders, and interpretations, the Article
13.1.1. defined “Change in Law” as an enactment, amendment or
repeal after 02.10.2009. Therefore, contention of the Appellant therein
that the Press Release dated 01.10.2009 amounts to an “order” was
held to have failed, while also referring its meaning in the Black’s
Law Dictionary, which required a binding command. However, such
notifications only emerged on 11.12.2009 and 14.12.2009.
42. Dealing with the subsequent questions of law, it also clarified that
the contention of Appellant therein on failure of the Respondent to
issue a notice as per the provisions of Article 13.3.1 and 13.3.2
would vitiate the provisions is misplaced owing to the fact that the
PPA only obligates a seller, and not a buyer as was PSPCL in the
said case, to have notified in case the “Change in Law” when it is
beneficial to it. The Bench also rejected the claims of the Appellant
therein that the sub-clauses pertaining to changes in interpretation,
licenses, land prices or rehabilitation costs are not applicable in the
present case. Furthermore, placing reliance on Babu Verghese and
Others v. Bar Council of Kerala and Others6 as well as Section
21 of the General Clauses Act, 1897, it held that CA 1962 required
the concerned notification to have been issued in a certain manner
and be duly published in the official gazette, and reiterated that law,
whether parliamentary or subordinate, must be published to enable
them to take effect.
43. The Bench additionally clarified that the claim for legitimate
expectation or promissory estoppel arising from the Press Release
dated 01.10.2009 would not survive as the Central Government
was neither a party to the PPA nor was the same subject to any
judicially enforceable promise and no order of any court gave the
said Press Release a legal force. Concluding, the 3-Judge Bench,
relying on numerous precedents, confirmed that only duly promulgated
5 (2018) 11 SCC 508
6 (1999) 3 SCC 422
1328 [2025] 8 S.C.R.
Supreme Court Reports
notifications, and not Press Releases or Communications, would
constitute as “Change in Law”. Accordingly, no “Change in Law” had
occurred until the Notifications dated 11.12.2009 and 14.12.2009,
thereby implying that the benefits would have been deemed to be
accrued only from the said dates.
44. Therefore, the aforesaid decision of 3-Judge Bench in Nabha
Power Limited (supra) squarely covers the field of law in relation
to the issue of determination of “Change in Law” in the instant case
and same is answered accordingly, holding that the Press Release
dated 01.10.2009 would neither amount to “law” within the meaning
conceptualized in the PPA, as it would only be the Notifications dated
11.12.2009 and 14.12.2009 that would have amounted to “law”, nor
it would thereby amount to “Change in Law” as argued by Appellants
in the instant Civil Appeals.
45. Having answered the issue pertaining to “Change in Law” we shall
now deal with the issue as to whether deemed export benefits under
Para 8.3 of the FTP were legitimately available to the Appellants
as on the bid cut-off date. It is pertinent to also acknowledge that
this issue shall also determine the contention of Appellants that
withdrawal of deemed export benefits by notifications of DGFT dated
28.12.2011 and 21.03.2012 collectively constitutes “Change in Law”
as per the PPA.
46. It appears that the learned Senior Advocates appearing for NPL before
the APTEL and the learned counsel appearing for TSPL therein had
argued to the effect that the conditions prescribed under the FTP
have been unambiguously satisfied. On the legal aspect, it was
submitted that the scheme of FTP clearly pertains to “goods” and
not to any “services”. Accordingly, contending that the whole power
plant falls within the definition of “capital goods”, thereby eligible for
the deemed export benefits.
47. To substantiate the said claim, the counsels elaborated that as Para
9.12 of the FTP, “capital goods” encompasses any plant, machinery,
equipment or accessories required, either directly or indirectly, for
the production or rendering of services, including those necessary
for replacement, modernisation, technological upgradation, and
expansion, and also extends to machinery for packaging, power
generating sets, instrumentations, and equipment(s) for various
specialized functions. Placing reliance on the Minutes No. 01180
[2025] 8 S.C.R. 1329
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
dated 15.04.2008 of the Norms Committee, it was contended that
a power project was indeed recognised to fall within the ambit of
“capital goods”, reiterating that key components such as turbines
and generators used within a plant are an integral input, enabling
the project to be entitled to advanced authorization benefits, which,
as further contented, are akin to the duty drawback contemplated
under Para 8.3(c) of the FTP.
48. It was further argued that the whole process of developing a power
plant constitute as “manufacture” when placed in juxtaposition to
the definition so provided under Para 9.36 of the FTP as it adopts
a broader definition, including making, assembling, fabricating,
processing, and bringing new product into existence. Such
comprehensive scope, as contended, would also cover activities
of construction where the imported and indigenous materials, such
as the boilers, turbines, and generators are assembled on-site,
resulting in a new, and functional power plant. This was further
contented to be in line with the clarification issued by the DGFT on
05.12.2000, apparently stating that assembly and commissioning at
site to constitute “manufactured in India” for the purpose of availing
deemed export benefits under the FTP. As the said clarification
was in force as on the bid date, the Appellants met the criterion for
“manufactured in India”, thereby fulfilling both the critical conditions
for availing the aforesaid benefits.
49. Having failed on the said contentions before the APTEL, it appears
that the Appellants have moulded the contentions before this Court to
imply that the aforesaid were not the asserted case before the APTEL
and instead the APTEL had erred in determining the entitlement of
deemed export benefits under the FTP based on the imports made
after the grant of MPP status and alleged policy changes as opposed
to assessing the position of the Appellants as it stood on the cut-off
date vis-à-vis the FTP.
50. It is now further argued that APTEL had erred in concluding that
the Appellants claimed entire plant as “capital goods”, which is
manifestly perverse and the contention was confined to the discrete
components as supplied by both, the main contractor(s) and the
sub-contractor(s). It is contended that numerous components were
imported for the boiler, turbine, and generators which were then
claimed to be assembled on-site into new products with distinct
1330 [2025] 8 S.C.R.
Supreme Court Reports
names, characteristics, and functions, meeting the stipulations under
the FTP as these indigenous components, which were procured for
the power plant would qualify as “goods” under the FTP as their
importation was directly linked to the MPP.
51. Moreover, the APTEL ought not to have invoked the definition of
“manufacture” under the CEA 1944, and such a disregard of the
broader ambit of definition under Para 9.36 of the FTP, and the
DGFT Circulars dated 05.12.2000 and 15.04.2008 recognising on-
site assembly, erection, and testing thereof as “manufacture”. To
support this, reliance is placed on decisions of this Court in Vadilal
Chemicals Ltd. v. State of A.P. and Others7, MSCO. Pvt. Ltd. v.
Union of India and Others8, Trutuf Safety Glass Industries v.
Commissioner of Sales Tax, U.P.9 and P.C. Cheriyan v. Mst. Barfi
Devi10. APTEL could not have also observed the clarifications issued
by the DGFT to be an incorrect interpretation of the FTP.
52. It is subsequently raised that all the goods were supplied by contractors
is also acknowledged by the APTEL vide Impugned Judgment in Para
76(d). For this, it is contended that such importation would imply to
squarely fall within the definition of “eligible supplier” under Para 8.2(f)
of the FTP for the said goods are said to be procured from domestic
manufacturers supplying against an process of ICB. It is pressed
into service on part of the Appellants that on the mandate of ICB
as per Para 8.4.4(iv) of the FTP, APTEL further erred in adopting a
restrictive interpretation and the mandate was complied with at the
stage of Independent Power Producer stage in light of the DGFT
Clarification dated 14.08.2008. Subsequent arrangements made for
stage of Engineering and Procurement, and construction through
sub-contracts does not dilute the aforesaid compliance.
53. Concluding, it is contended that the projects were duly certified as
MPP and a subsequent refusal to extend such deemed export benefits
would be in derogation of the mandate of the FTP.
54. Alternatively, the Appellants have also argued that as per a collective
reference to the FTP and the MPP, if it is to be held that they were
7 (2005) 6 SCC 292
8 (1985) 1 SCC 51
9 (2007) 7 SCC 242
10 (1980) 2 SCC 461
[2025] 8 S.C.R. 1331
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
not entitled to the deemed export benefits under the FTP as MPP,
owing to the same eligibility conditions for a non-MPP under the
FTP, as on the cut-off date, they were equally entitled as a non-MPP.
55. Countering the aforesaid contentions raised on behalf of the
Appellants, learned Senior Advocate on behalf of the opposing
Respondent(s), while vehemently contesting the claims of the
Appellants have reiterated their successful claims before the APTEL.
56. Before we delve into the submissions moved by the Appellants, it is
pertinent to refer to Chapter 8 of the FTP, which reads as follows:
“8.1 Deemed Exports
‘Deemed Exports’ refer to those transactions in which
goods supplied do not leave country, and payment for
such supplies is received either in Indian rupees or in free
foreign exchange.
8.2 Categories of Supply
Following categories of supply of goods by main / sub-
contractors shall be regarded as ‘Deemed Exports’ under
FTP, provided goods are manufactured in India:
(a) Supply of goods against Advance Authorisation /
Advance Authorisation for annual requirement / DFIA;
(b) Supply of goods to EOUs / STPs / EHTP / BTP;
(c) Supply of capital goods to EPCG Authorisation
holders;
(d) Supply of goods to projects financed by multilateral
or bilateral Agencies / Funds as notified by Department
of Economic Affairs (DEA), MoF under International
Competitive Bidding (ICB) in accordance with
procedures of those Agencies / Funds, where legal
agreements provide for tender evaluation without
including customs duty;
Supply and installation of goods and equipment
(single responsibility of turnkey contracts) to projects
financed by multilateral or bilateral Agencies / Funds
as notified by DEA, MoF under ICB in accordance
1332 [2025] 8 S.C.R.
Supreme Court Reports
with procedures of those Agencies / Funds, which
bids may have been invited and evaluated on the
basis of Delivered Duty Paid (DDP) prices for goods
manufactured abroad;
(e) Supply of capital goods, including in unassembled /
disassembled condition as well as plants, machinery,
accessories, tools, dies and such goods which are
used for installation purposes till stage of commercial
production, and spares to extent of 10% of FOR value
to fertilizer plants;
(f) Supply of goods to any project or purpose in
respect of which the MoF, by a notification, permits
import of such goods at zero customs duty;
(g) Supply of goods to power projects and refineries
not covered in (f) above;
(h) Supply of marine freight containers by 100% EOU
(Domestic freight containers-manufacturers) provided
said containers are exported out of India within 6
months or such further period as permitted by customs;
(i) Supply to projects funded by UN Agencies; and
(j) Supply of goods to nuclear power projects through
competitive bidding as opposed to ICB.
Benefits of deemed exports shall be available under
paragraphs (d), (e), (f) and (g) only if the supply is
made under procedure of ICB.
8.3 Benefits for Deemed Exports
Deemed exports shall be eligible for any / all of following
benefits in respect of manufacture and supply of goods
qualifying as deemed exports subject to terms and
conditions as in HBP v1:-
(a) Advance Authorisation / Advance Authorisation
for annual requirement / DFIA.
(b) Deemed Export Drawback.
[2025] 8 S.C.R. 1333
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
(c) Exemption from terminal excise duty where
supplies are made against ICB. In other cases, refund
of terminal excise duty will be given. Exemption from
TED shall also be available for supplies made by
an Advance Authorisation holder to a manufacturer
holding another Advance Authorization if such
manufacturer, in turn, supplies the product(s) to an
ultimate exporter.
Benefits to the Supplier
8.4.1. (i) In respect of supplies made against Advance
Authorisation / DFIA in terms of paragraph 8.2(a)
of FTP, supplier shall be entitled to Advance
Authorisation / DFIA for intermediate supplies.
(ii) If supplies are made against Advance
Release Order (ARO) or Back to Back Letter of
Credit issued against Advance Authorisation /
DFIA in terms of paragraphs 4.1.11 and 4.1.12 of
FTP, suppliers shall be entitled to benefits listed
in paragraphs 8.3(b) and (c) of FTP, wherever
is applicable.
8.4.2. In respect of supply of goods to EOU / EHTP /
STP / BTP in terms of paragraph 8.2(b) of FTP,
supplier shall be entitled to benefits listed in
paragraphs 8.3(a), (b) and (c) of FTP, whichever
is applicable.
8.4.3. In respect of supplies made under paragraph
8.2(c) of FTP, supplier shall be entitled to the
benefits listed in paragraphs 8.3(a), (b) and (c)
of the Policy, whichever is applicable.
8.4.4. (i) In respect of supplies made under paragraphs
8.2(d), (f) and (g) of FTP, supplier shall be
entitled to benefits listed in paragraphs 8.3(a),
(b) and (c), whichever is applicable.
(ii) In respect of supplies mentioned in paragraph
8.2(d), supplies to projects funded by such
Agencies alone, as may be notified by DEA, MoF,
1334 [2025] 8 S.C.R.
Supreme Court Reports
shall be eligible for deemed export benefits. A list
of such Agencies / Funds is given in Appendix
13 of HBP v1.
(iii) Benefits of deemed exports under para
8.2(f) of FTP shall be applicable in respect
of items, import of which is allowed by DoR
at zero customs duty, subject to fulfillment of
conditions specified under Notification No.
21/2002-Customs dated 1.3.2002, as amended
from time to time.
(iv) Supply of Capital goods and spares upto
10% of FOR value of capital goods to power
projects in terms of paragraph 8.2(g), shall be
entitled for deemed export benefits provided
the ICB procedures have been followed at
Independent Power Producer (IPP) / Engineering
and Procurement Contract (EPC) stage. Benefit
of deemed exports shall also be available for
renovation / modernization of power plants.
Supplier shall be eligible for benefits listed in
paragraph 8.3(a) and (b) of FTP, whichever is
applicable. However, supply of goods required
for setting up of any mega power projects as
specified in S.No. 400 of DoR Notification
No. 21/2002-Customs dated 1.3.2002, as
amended, shall be eligible for deemed export
benefits as mentioned in paragraph 8.3(a),
(b) and (c) of FTP, whichever is applicable, if
such mega power project complies with the
threshold generation capacity specified therein,
in Customs Notification.
(v) Supplies under paragraph 8.2(g) of FTP to
new refineries being set up during Ninth Plan
period and spilled over to Tenth Plan period,
shall be entitled for deemed export benefits in
respect of goods mentioned in list 17 specified in
S.No. 228 of Notification No. 21/2002-Customs
dated 1.3.2002, as amended from time to time.
[2025] 8 S.C.R. 1335
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
Supplier shall be eligible for benefits listed in
paragraphs 8.3(a) and (b) of FTP, whichever
is applicable.
8.4.5. In respect of supplies made under paragraph
8.2(e) of FTP, supplier shall be eligible for
benefits listed in paragraph 8.3(a) and (b) of
FTP, whichever is applicable. Benefit of deemed
exports shall be available in respect of supplies
of capital goods and spares to Fertilizer Plants
which are set up or expanded / revamped /
retrofitted / modernized during Ninth Plan period.
Benefit of deemed exports shall also be available
on supplies made to Fertilizers Plants, which
have started in the 8th / 9th Plan periods and
spilled over to 10th Plan period.
8.4.6. Supplies of goods to projects funded by UN
Agencies covered under para 8.2(i) of FTP are
eligible for benefits listed in paragraph 8.3(a)
and (b) of FTP, whichever is applicable.
8.4.7. In respect of supplies made to Nuclear Power
Projects under para 8.2(j) of FTP, the supplier
would be eligible for benefits given in para 8.3(a),
(b) and (c) of FTP, whichever is applicable.
Supply of only those goods required for setting
up any Nuclear Power Poject specified in list 43
at S.No. 401 of Notification No. 21/2002-Customs
dated 1.3.2002, as amended from time to time,
having a capacity of 440MW or more as certified
by an officer not below rank of Joint Secretary
to Government of India in Department of Atomic
Energy, shall be entitled for deemed exports
benefits in cases where procedure of competitive
bidding (and not ICB ) has been followed.
8.5 Eligibility for refund of terminal excise duty /
drawback
Supply of goods will be eligible for refund of terminal excise
duty in terms of para 8.3(c) of FTP, provided recipient of
1336 [2025] 8 S.C.R.
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goods does not avail CENVAT credit / rebate on such
goods. Similarly, supplies will be eligible for deemed
export drawback in terms of para 8.3(b) of FTP on Central
Excise paid on inputs / components, provided CENVAT
credit facility / rebate has not been availed by applicant.
Such supplies will however be eligible for deemed export
drawback on customs duty paid on inputs / components.
8.5.1. Simple interest @ 6% per annum will be payable
on delay in refund of drawback and terminal
excise duty under deemed export scheme, if
the case is not settled within 30 days of receipt
of complete application (as in paragraph 9.10.1
of HBP v1).
8.6.1. Supplies to be made by the main / sub-
contractor
In all cases of deemed exports, supplies shall
be made directly to designated Projects /
Agencies / Units / Advance Authorisation /
EPCG Authorisation holders. Sub-contractor
may, however, make supplies to main contractor
instead of supplying directly to designated
projects / Agencies. Such supplies shall be
eligible for deemed export benefits as per
procedure laid down in paragraph 8.4 of HBP v1.
8.6.2. Supplies made by an Indian sub-contractor of
an Indian or foreign main contractor directly to
the designated projects / Agencies, shall also
be eligible for deemed export benefits provided
sub-contractor is indicated either originally or
subsequently in the contract, and payment
certificate is issued by project authority in the
name of sub-contractor as in Appendix 22C of
HBP v1.”
The following definitions within FTP also ought to be
referred:
“9.12 ‘Capital Goods’ means any plant, machinery,
equipment or accessories required for manufacture
[2025] 8 S.C.R. 1337
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
or production, either directly or indirectly, of goods
or for rendering services, including those required
for replacement, modernisation, technological
upgradation or expansion. It also includes packaging
machinery and equipment, refractories for initial
lining, refrigeration equipment, power generating
sets, machine tools, catalysts for initial charge,
equipment and instruments for testing, research
and development, quality and pollution control.
Capital goods may be for use in manufacturing,
mining, agriculture, aquaculture, animal husbandry,
floriculture, horticulture, pisciculture, poultry,
sericulture and viticulture as well as for use in
services sector.
xxx xxx xxx
9.14 ‘Component’ means one of the parts of a sub-
assembly or assembly of which a manufactured
product is made up and into which it may be
resolved. A component includes an accessory or
attachment to another component.
xxx xxx xxx
9.36 ‘Manufacture’ means to make, produce, fabricate,
assemble, process or bring into existence, by
hand or by machine, a new product having
a distinctive name, character or use and
shall include processes such as refrigeration,
re-packing, polishing, labelling, Re-conditioning
repair, remaking, refurbishing, testing, calibration,
re-engineering. Manufacture, for the purpose of FTP,
shall also include agriculture, aquaculture, animal
husbandry, floriculture, horticulture, pisciculture,
poultry, sericulture, viticulture and mining.”
57. From a perusal of the FTP, pleadings as well as submissions of
the parties, as aforesaid, there are five essential prerequisites that
ought to be satisfied by the Appellants in order to be eligible for the
deemed export benefit(s). The said pre-conditions can be enumerated
in the following manner:
1338 [2025] 8 S.C.R.
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(i) The claim for Deemed Export Benefits relates exclusively to
“goods” and is inapplicable to any other thing which is not
“goods”. Such goods, though supplied, do not physically exit
the territorial boundaries of the country.
(ii) The goods to be supplied must be “manufactured in India”.
(iii) There must be an act constituting “supply of goods” to the
power projects for the project to claim Deemed Export Benefits.
(iv) The act of “supply of goods” is either by the main contractor
and/or the sub-contractor to the concerned power project.
(v) The supply is undertaken strictly in accordance with the
procedural framework prescribed under ICB.
58. Now we would proceed to consider and deal with the above culled
out essential ingredients for being eligible for claim of Deemed
Export Benefits.
59. From the FTP, it is apparent that the foremost prerequisite to avail
the deemed export benefits is limited to “goods”, the definition for
which is absent therein, despite there being an explicit reference to
“capital goods” and “consumer goods”. Accordingly, we may refer to
the following references to define “goods”. Firstly, in Fifth edition of
P. Ramanatha Aiyar’s Advanced Law Lexicon, wherein, goods has
been defined as:
“‘GOODS’ means every kind of movable property other
than actionable claims and money; and includes stocks
and shares, growing crops, grass and things attached, to
or forming part of the land which are agreed to be severed
before sale or under the contract of sale. [Sale of Goods
Act (3 of 1930), S. 2(7)]
For the purposes of this clause, “goods” includes any article
material or substance which is capable of being bought and
sold for a consideration and such goods shall be deemed
to be marketable. [Central Excise Act (1 of 1944), S. 2,
Expln. as inserted by Finance Act (18 of 2008), S. 78]
xxx xxx xxx
‘Goods’ means all kinds of movable property other than
actionable claims, stocks, shares and securities, and
[2025] 8 S.C.R. 1339
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
includes all materials, articles and commodities including
the goods (as goods or in some other form), involved in
the execution of a works contract or those goods used or
to be used in the construction, fitting out, improvement or
repair of movable or immovable property and also includes
all growing crops, grass and things attached to or forming
part of the land which are agreed to be severed before
sale or under the contract of sale and also includes motor
spirit.”[A.P. General Sales Tax Act (6 of 1957), S. 2(1)(h)
as cited in Tata Consultancy Services v. State of A.P.,
(2005) 1 SCC 308, 316, para 7])
xxx xxx xxx
‘GOODS’ means all kinds of movable property (other
than newspaper, actionable claims, stocks and shares
and securities), and includes, all materials, commodities,
and articles including the goods, as goods or in some
other form) involved in the execution of a work-contract
or, those goods to be used in the fitting out improvement
or repair of moveable property and all growing crops,
grass or things, attached to, or forming part of, the lands
which are agreed to be severed before sale or under the
contract of sale. [Karnataka Sales Tax Act (25 of 1957), S.
2(m) and T.N. General Sales Tax Act (1 of 1959), S. 2(j)
as cited in Vikas Sales Corpn v. Commr. of Commercial
Taxes, (1996) 4 SCC 433, 441-42, pp. 15, 16: AIR 1996
SC 2082]
‘GOODS’ means machinery, motor vehicles, equipment,
furniture, articles of stationary, textiles raw materials,
drugs, scientific instruments, chemical, food grains, oil and
oil seeds or other commodity required for consumption,
use or distribution by a procurement entity in discharge
of its public duties’. [Karnataka Transparency in Public
Procurement Act (29 of 2000), S. 2(b) as cited in State of
Karnataka v. Fisheries Welfare Co-operative Society Ltd.,
AIR 2012 Kar 132, para 2].”
Secondly, in Third Edition of Supreme Court Words and Phrases
by Surendra Malik and Sumit Malik, “goods” are defined to be as:
1340 [2025] 8 S.C.R.
Supreme Court Reports
“‘Goods’- Constitution of India - Sch. VII List II Entries 53
& 54 and Arts. 366(12) & (29-A)
‘Goods’ may be tangible or intangible prop- erty. It would
become goods provided it has the attributes thereof having
regard to (a) its utility; (b) capable of being bought and
sold; and (c) capable of being transmitted, transferred,
delivered, stored and possessed. (Para 151)”
60. It is apparent from the aforesaid that in the common parlance, the
term “goods” denotes movable items and shall exclude immovable
items. To further elaborate, this Court in Quality Steel Tubes (P)
Ltd v. Collector of Central Excise, U.P.11 went on to observe that for
a good to qualify as “excisable”, it must qualify as “goods” and should
also be able to satisfy the “marketability test” which was established
in Union of India and Another v. Delhi Cloth and General Mills
Co. Ltd.12 and was reiterated in the subsequent decisions of this
Court in Collector of Central Excise, Baroda v. Ambalal Sarabhai
Enterprises (P) Ltd.13 and Union Carbide India Limited v. Union
of India and Others14. Therefore, it stands settled that an immovable
property, especially a machinery embedded to earth, as in the instant
case, would fail the aforesaid test.
61. It is also true that Captive Power Plants have been recognized
as “capital goods” within the scope of subsequent FTP, but those
importable products are movable and cannot be equated to the
Project Plant in the instant case. The correct means to analyse
and determine expression “capital goods” would be subject to the
definition of the term “goods” especially when Para 9.12 of the FTP
only encompasses movable items. It would not be possible within the
given canvas to hold that an embedded power plant of hundreds of
Mega Watts would be able to qualify as “capital goods” for entitlement
of the Appellants under the FTP for the deemed export benefits.
62. The second prerequisite is derived from the opening paragraph of
Para 8.2 of the FTP makes it obligatory that concerned goods as
required to be supplied must be manufactured in India. Para 9.36
11 (1995) 2 SCC 372
12 1962 SCC OnLine SC 148
13 (1989) 4 SCC 112
14 (1986) 2 SCC 547
[2025] 8 S.C.R. 1341
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
of the FTP goes on to define “manufacture” as making, producing,
fabricating, assembling, processing, or otherwise bringing into
existence, by hand or machine, a new product with a distinctive
name, character, or use, and goes on to include processes like
refrigeration, repacking, polishing, labelling, reconditioning, repairing,
remaking, refurbishing, testing, calibration, and re-engineering, as
well as activities like agriculture, horticulture, floriculture, animal
husbandry, pisciculture, poultry, sericulture, viticulture, and mining.
Dealing further with “manufacture”, we may refer to the Fifth edition
of P. Ramanatha Aiyar’s Advanced Law Lexicon wherein, the varied
and relevant connotations of the word have been elaborated as:
“‘MANUFACTURE’ implies a change, but every change is
not manufacture and yet every change of an article is the
result of treatment labour and manipulation. But something
more is necessary and there must be transformation; a
new and different article must emerge having a distinctive
name, character or use. [Words and Phrases, Permanent
Edition, Vol XXVI, as cited in Union of India v. Ahmedabad
Electricity Co. Ltd., AIR 2004 SC 11, 16, para 19]
Conversion of raw materials into a finished product, e.g.
converting iron ore into steel plate.
Manufacture is: (1) The application, to material, of labour
or skill, whereby the original article is changed to a new,
different, and useful article, provided the process is of a
kind popularly regarded as manufacture, or (2) the product
of such process.
‘Whatever is made by human labour, either directly or
through the instrumentality of machinery.’ (Abbott L. Dict.)
To constitute a manufacture, within the customs duty acts,
there must be a transformation. Mere labour bestowed on
an article, even if the labour is applied through machinery,
will not make it a manufacture, unless it has progressed so
far that a transformation ensues, and the article becomes
commercially known as another and different article from
that as which it began its existence.
Every alteration in an article does not confer on it a new
character as a manufacture. To constitute a new and
1342 [2025] 8 S.C.R.
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different article and a manufactured article, it must be
so changed as to have a positive and specific use in its
new state.
‘The process of making a thing by art.’ (Burrill)
The word ‘manufacture’ is a compound word of Latin origin
derived from the words “manu,” by hand and “facere,” to
do, to make, to form; but the meaning is not confined to
that which is done by hand alone, but by machinery as
well. (In re Tecopa Min, etc., Co., 110 Fed 120, 121. See
also 110 IC 788: 29 Cr LJ 756: 1928 Pat 506)
xxx xxx xxx
Etymologically, ‘manufacture’ is a compound word from
Latin “manu” meaning “hand” and “facere” which means
“made”. Thus, in its primary sense, ‘manufacturing’ is
fashioning of a raw or wrought material by manual or
mechanical manipulation, resulting in its transformation; a
new and different article must emerge having a distinctive
name, character or use. Raghbir Chand Som Chand v.
Excise & Taxn. Officer, (1960) 11 STC 149, 164-5 (Punj).
Also see North Bengal Stores Ltd. v. Board of Revenue,
(1938-50) 1 STC 157, 163-4 (Cal); State of Bihar v.
Chrestien Mica Industries Ltd., (1956) 7 STC 626, 631
(Pat), affirmed (1961) 12 STC 150 (SC); G.R. Kulkarni v.
The State, (1957) 8 STC 294 (MP); CIT v. Casino (Pvt.)
Ltd., (1973) 91 ITR 289 (Ker)
xxx xxx xxx
‘The word ‘Manufacture’,’ said ABBOTT, C.J., in R. v.
Wheeler, 2 B. & Ald. 349, has been generally understood
to denote, either a thing made which is useful for its own
sake and vendible as such, as a medicine, a stove, a
telescope, and many others; or to mean an engine or
instrument, or some part of an engine or instrument, to be
employed either in the making of some previously known
article, or in some other useful purpose, as a stocking
frame, or a steam engine for raising water from mines;
or, it may, perhaps, extend also to a new process to be
carried on by known implements or elements acting upon
[2025] 8 S.C.R. 1343
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
known substances, and ultimately producing some other
known substance but producing it in a cheaper or more
expeditious manner, or of a better or more useful kind.
No mere philosophical or abstract principle can answer
to the word ‘Manufactures.’ Something of a corporeal and
substantial nature,— something that can be made by man
from the matters subjected to his art and skill, or at the
least some new mode of employing practically his art and
skill, is required to satisfy the word.” (See also Gibson v.
Brand, 4 M. & G. 199)
xxx xxx xxx
The expression ‘manufacture’ is normally related to
movable articles and goods. It cannot be employed to
denote construction of a building or a dam or a bridge.
[CIT v. Ceo Tech Foundation and Construction, (2000)
241 ITR 90 (Ker)]”
63. Even a 5-Judge Bench of this Court, in Delhi Cloth and General
Mills (supra), while dealing with determination of excise duty on the
Respondents therein under the Central Excise and Salt Act, 1944
observed that:
"16. This consideration of the meaning of the word
‘goods’ provides strong support for the view that
“manufacture” which is liable to excise duty under
the Central Excise and Salt Act, 1944 must be the
‘bringing into existence of a new substance known to
the market’. ‘But,’ says the learned counsel, “look at
the definition of ‘manufacture’ in the definition clause
of the Act and you will find that ‘manufacture’ is defined
thus: ‘Manufacture includes any process incidental
or ancillary to the completion of a manufactured
product.’ [Section 2(f)]. We are unable to agree with
the learned counsel that by inserting this definition of
the word ‘manufacture’ in Section 2(f) the legislature
intended to equate ‘processing’ to ‘manufacture’ and
intended to make more ‘processing’ as distinct from
‘manufacture’ in the sense of bringing into existence
of a new substance known to the market, liable to
duty. The sole purpose of inserting this definition
1344 [2025] 8 S.C.R.
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is to make it clear that at certain places in the Act
the word ‘manufacture’ has been used to mean a
process incidental to the manufacture of the article.
Thus in the very item under which the excise duty
is claimed in these cases, we find the words; ‘in or
in relation to the manufacture of which any process
is ordinarily carried on with the aid of power’. The
definition of ‘manufacture’ as in Section 2(f) puts it
beyond any possibility of controversy that if power
is used for any of the numerous processes that are
required to turn the raw material into a finished article
known to the market the clause will be applicable;
and an argument that power is not used in the
whole process of manufacture using the word in its
ordinary sense, will not be available. It is only with
this limited purpose that the legislature, in our opinion,
inserted this definition of the word ‘manufacture’ in
the definition section and not with a view to make the
mere ‘processing’ of goods as liable to excise duty.”
64. While discussing the meaning of the word “production”, a reference
was made by this Court to the elaboration of “manufacture” as well
in India Cine Agencies v. Commissioner of Income Tax, Madras15
in a dispute involving entitlement of benefits under Sections 32-AB,
80-HH, 80-I of Income Tax Act, 1961 as:
"5. In Words and Phrases, 2nd Edn. by Justice R.P.
Sethi the expressions ‘produce’ and ‘production’ are
described as under:
‘In Webster’s New International Dictionary, the word
‘produce’ means something that is brought forth either
naturally or as a result of effort and work; a result
produced. In Black’s Law Dictionary, the meaning of
the word ‘produce’ is to ‘bring into view or notice; to
bring to surface’. A reading of the aforesaid dictionary
meanings of the word ‘produce’ does indicate that if a
living creature is brought forth, it can be said that it is
produced. [See CIT v. Venkateswara Hatcheries (P)
15 (2008) 17 SCC 385
[2025] 8 S.C.R. 1345
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
Ltd. [(1999) 3 SCC 632] , CIT v. N.C. Budharaja and
Co. [1994 Supp (1) SCC 280 : (1993) 204 ITR 412] ]
Production or produce.—The word ‘production’ or
‘produce’ when used in juxtaposition with the word
‘manufacture’ takes in bringing into existence new
goods by a process, which may or may not amount
to manufacture. It also takes in all the by-products,
intermediate products and residual products, which
emerge in the course of manufacture of goods. The
expressions ‘manufacture’ and ‘produce’ are normally
associated with movable articles and goods, big and
small but they are never employed to denote the
construction activity of the nature involved in the
construction of a dam or for that matter a bridge, a
road and a building. [See Moti Laminates (P) Ltd. v.
CCE [(1995) 3 SCC 23] .]’
6. In Advanced Law Lexicon, 3rd Edn. by P. Ramanatha
Aiyar, the expressions ‘production’ and ‘manufacture’
are described as under:
‘ ‘Production’ with its grammatical variations and
cognate expressions; includes—
(i) packing; labelling, re-labelling, of containers,
(ii) re-packing from bulk packages to retail
packages, and
(iii) the adoption of any other method to render
the product marketable.
‘Production’ in relation to a feature film, includes any
of the activities in respect of the making thereof. [Cine
Workers and Cinema Theatre Workers (Regulations
of Employment) Act (50 of 1981), Section 2(i).]
***
The word ‘production’ may designate as well a thing
produced as the operation of producing; (as) production
of commodities or the production of a witness.
***
1346 [2025] 8 S.C.R.
Supreme Court Reports
‘Manufacture’ includes any art, process or manner of
producing, preparing or making an article, and also
any article prepared or produced by manufacture.
[Patents and Designs Act (2 of 1911), Section 2(10).]
***
‘Manufacture’ includes any process—
(i) incidental or ancillary to the completion of a
manufactured product; and
(ii) which is specified in relation to any goods
in the section or Chapter Notes of the First
Schedule to the Central Excise Tariff Act, 1985
(5 of 1986) as amounting to manufacture, or,
and the word ‘manufacturer’ shall be construed
accordingly and shall include not only a person
who employs hired labour in the production or
manufacture of excisable goods, but also any
person who engages in their production or
manufacture on his own account;
(iii) which is specified in relation to any goods
by the Central Government, by notification in the
Official Gazette, as amounting to manufacture.
[Central Excise Act (1 of 1944), Section 2(f)]’ ”
65. Placing reliance on this Court’s decision in Commissioner of Income
Tax, Orissa and Others v. M/s N.C. Budharaja and Company and
Others16, High Courts, such as that of Kerala, in Commissioner
of Income-Tax v. Geo Tech Foundation & Constructions17 have
also proceeded to hold that while “manufacture” and “produce” are,
in the usual understanding, associated with movable articles and
goods, the same can never be deemed to also include or to denote
an activity amounting to construction.
66. Similarly, in Moti Laminates Pvt. Ltd. and Others v. Collector
of Central Excise, Ahmedabad18, this Court observed that excise
16 (1994) Supp. 1 SCC 280
17 (2000) 241 ITR 90 : 1999 SCC OnLine Ker 341
18 (1995) 3 SCC 23
[2025] 8 S.C.R. 1347
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
duty can only be applied to the produced goods which are usable,
movable, saleable, and marketable. Also from the aforementioned
decisions like the Union Carbide India (supra), Bhor Industries
Limited, Bombay v. Collector of Central Excise, Bombay19, and
Hindustan Polymers v. Collector of Central Excise20, it was
reiterated that goods ought to be known in the market and should
be capable of being sold.
67. Therefore, in the light of the above, the instant case, as projected
and pressed before us by the Appellants, would fall foul of
the essentiality when Para 9.36 of the FTP requires that the
manufactured good should have been brought into existence with
a distinctive name, character, or use. Such a feasibility would be
impossible when it comes to the concerned power plants in the
instant set of Appeals.
68. The third essential criterion for availing the said deemed export
benefits is “supply of goods” to a power plant, as is contemplated
under Para 8.2(g) of the FTP. However, from the original pleadings
of the Appellants before the APTEL, it is established that they had
made an unsuccessful attempt to argue that the whole power plant
under their concerned Project fell within the ambit of definition of
supply of “goods”. Contemplating their contention on the basis
that the power plant falls within “capital goods”, it would neither be
permissible nor viable to supply a power plant to itself as per the
mandate of the FTP and especially, in the light of Para 8.2(g) of
the FTP contemplating categorization of “supply of goods” to power
projects and refineries not covered in Para 8.2(f) which, in turn,
deals with supply of goods to any project or purpose in respect
of which the Ministry of Finance, by a notification, permits import
of such goods at zero customs duty. Therefore, we are inclined to
accept the contentions raised on behalf of PSPCL and observe this
condition to remain unfulfilled.
69. The fourth foundational prerequisite to avail the deemed export
benefits, as stipulated through Para 8.2, read with Para 8.6 of the
FTP mandates that the supply of goods must be effected either by
the main contractor or the sub-contractor to the concerned project.
19 (1989) 1 SCC 602
20 (1989) 4 SCC 323
1348 [2025] 8 S.C.R.
Supreme Court Reports
In the present factual matrix an entitlement to the deemed export
benefits only accrue when the goods, as manufactured by the main
contractor, are supplied to the Project, herein being either the NPL
or TSPL, or in the alternative, the goods are manufactured by the
sub-contractor and supplied directly to the project or through the
main contractor. However, it appears that before the forums of law
below, and even at the time of bidding, the to-be then constructed
Power Plant itself was deemed as the concerned capital goods for the
deemed export benefits, implying that there was no distinct supply of
goods by either a main contractor or a sub-contractor thereof. Rather,
a claim to seek the benefits in respect of the entire power plant was
made. Such a situation of suo moto acclaimed manufacturing in the
Project’s own right shall not stand the instant test.
70. The fifth prerequisite for availing the aforementioned benefits under
the FTP is a strict adherence to the necessity of procurement of
goods through ICB, as stipulated in the latter part of the Para 8.2
and Para 8.4.4(iv) of the FTP. Herein, it is categorically made
mandatory that the supplies as contemplated under clauses (d),
(e), (f), and (g) of the Para 8.2 would qualify for the deemed export
benefits only if the same is so effected through the mandate of
ICB. Moreover, Para 8.4.4(iv) provides that the supply of capital
goods and permissible spare up to 10% of the Free on Rail value
to the concerned power projects under Para 8.2(g), subject to
the condition that ICB has been adopted either at the stage of
Independent Power Producer or Engineering Procurement Contract.
The said benefit originally also extended to the MPPs, subject to the
capacity thresholds as prescribed under Department of Revenue’s
Notification No. 21/2002-Customs. Therefore, it is an incorrect and
misplaced contention subsequently raised by the Appellants before
this Court that the proviso to Para 8.2 is applicable to all kinds of
projects therein and that Para 8.4.4(iv) is a special provision and
deals specifically with Para 8.2(g).
71. Moreover, by virtue of amendments dated 14.01.2010 and 08.02.2010
to the FTP, a limited relaxation was carved out exclusively for the
MPPs wherein the mandate of ICB had been exempted if the required
quantum of power had been tied up through adopting of Tariff-Based
Competitive Bidding, or the project was awarded in the said manner.
Clearly, as on the concerned cut-off date, neither of the Appellants
would have been able to plead that Tariff-Based Competitive
[2025] 8 S.C.R. 1349
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
Bidding was a permissible alternative under the FTP for either of
the aforesaid stages. It is submitted on behalf of the Appellants that
ICB was conducted at the Independent Power Producer stage, in
tune with the mandate of Section 63 of the EA 2003 for selection of
the power developer, therefore, having sufficed the condition under
Para 8.4.4(iv) it was not required to conduct ICB at the Engineering
Procurement Contract stage.
72. A perusal thereof, clarifies that the essence of deemed export
benefits lay in the supply of goods to power projects, not in power
procurement arrangements. A collective and comprehensive reading
of Para 8.2, Para 8.4.4(iv) and Para 8.6 of the FTP establishes that
the Independent Power Producer stage is in reference to the main
contractor vis-à-vis supply of goods to the concerned project, while
the Engineering Procurement Contract stage concerns the supply by
a sub-contractor to the Engineering Procurement Contract contractor.
Undoubtedly, and admittedly, mandate of ICB may be claimed, on
behalf of the Appellants, to have been followed during their bidding
process leading to the PPAs, but no evidence has been produced
on record by the Appellants to determine whether such a mandate
i.e. ICB process was adopted by them for procurement of goods
concerned and/or to be supplied as per Para 8.4.4(iv) of the FTP,
which mandates ICB either at the stage of Independent Power
Producer or Engineering Procurement Contract when in relation
to a “supply of goods” as per Para 8.2(g) of the FTP. Reliance on
Tariff-Based Competitive Bidding by the Appellants for selection of
the power project developer cannot be equated with the mandate
of the ICB for supply of goods and is, therefore, a misnomer and a
misplaced plea raised on their part.
73. Considering the above contentions as raised before us albeit for
the first time, the Appellants, have clearly failed to establish the
procurement of “supply of goods” as per the mandate of ICB
either at the stage of Independent Power Producer or Engineering
Procurement Contract, owing to the fact that such procurement of
the components was done through directly entering into contract(s)
with their subsidiaries or joint venture or related companies, we
do not find any reason to further deal with the contentions raised
by the Appellants vis-à-vis other prerequisites as all the essential
pre-conditions unless ticked would not render them eligible for the
benefit claimed.
1350 [2025] 8 S.C.R.
Supreme Court Reports
74. The instant issue is answered against the Appellants to the effect
that they were not entitled to the deemed export benefits under
Para 8.3 of the FTP.
75. Having answered in the negative as aforesaid with regard to the
entitlement of the Appellants for the deemed export benefits under the
FTP, we ought not delve into the plea as to the alleged withdrawal of
the said benefits through notifications of the DGFT dated 28.12.2011
and 21.03.2012 collectively and whether that would amount to a
“Change in Law” as per Article 13 of the PPA.
76. However, while placing reliance on our discussion above of the
issue(s), the aforesaid notifications issued through DGFT were
mere clarificatory in nature. As a matter of fact, no interpretation
of law was undertaken prior to the cut-off date to the effect that a
developer shall be able to import goods to be assembled into a
power plant and also claim the deemed export benefits on those.
Therefore, APTEL, while dealing with the said issue in detail, and
correctly so, concluded that the aforesaid contended circulars to be
merely clarificatory and not as something which has either changed
or introduced something new, being allegedly oppressive towards
the Appellants.
77. Hypothetically, even assuming the case of the Appellants to the said
effect to be good in law and that notification(s) would indeed amount
to a “Change in Law”, it is merely an academic exercise without any
impact on the legal position of the Appellants. They were, and still
are not, entitled to any deemed export benefits under the FTP for
their inability to fulfil the concerned prerequisites as discussed by
us above.
78. Now, we shall proceed to consider the third issue in the instant Civil
Appeals, which is subject to positive contemplation of the earlier
issues as dealt by us and if so, whether Appellants are entitled to
restitutionary relief in the form of compensation.
79. It is clear from the detailed analysis of the first and second issues
raised in the instant Civil Appeals that the Appellants have not been
able to establish those in their favour and accordingly, there cannot
arise any question for compensation to the Appellants by the PSPCL
as a means of restitutionary relief.
[2025] 8 S.C.R. 1351
Nabha Power Limited v.
Punjab State Power Corporation Limited and Others
80. The Appellants have failed to impress this Court with their submissions
in these Civil Appeals and we find no ground to interfere with the
Impugned Judgment and order dated 04.07.2017 passed by the
Appellate Tribunal for Electricity, New Delhi.
81. These Appeals are dismissed being devoid of merit.
82. There shall be no order as to costs.
83. Pending application(s), if any, also stand disposed of.
Result of the case: Appeals dismissed.
†
Headnotes prepared by: Nidhi Jain
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