Rajasthan High Court Grants Electricity Duty Exemption For UltraTech's Captive Power Under Solar Policy 2019

The Rajasthan High Court has held that electricity duty exemption on captive consumption of solar power promised under the Solar Policy, 2019 cannot be withdrawn retrospectively so as to divest accrued rights, ruling that UltraTech Cement Ltd. and other petitioners are entitled to the benefit for projects commissioned prior to the amendment.

A Division Bench of Justice Arun Monga and Justice Sunil Beniwal delivered the judgment.

The dispute traces back to the State's amendment of the Solar Policy on May 10, 2022, through which the earlier promise of electricity duty exemption was withdrawn and made contingent on statutory notifications under the Rajasthan Electricity (Duty) Act, 1962.

UltraTech Cement, which runs cement manufacturing units in Rajasthan and had set up captive solar power projects, maintained that it had relied on the State's policy assurance. The policy, it pointed out, “assured exemption from payment of electricity duty for a period of seven years from the date of commissioning of solar power plants.”

According to the company, these assurances were not merely incidental. They formed the basis for substantial capital investment, and withdrawing the benefit thereafter, it argued, ran contrary to the doctrines of promissory estoppel and legitimate expectation.

The State took a different position. It argued that electricity duty is a statutory levy governed solely by the Rajasthan Electricity (Duty) Act, 1962, and any exemption must flow from a notification issued under that law. Policies, it said, do not create enforceable rights and can be revised or withdrawn in public interest.

Addressing this contention, the court observed:

“The Rajasthan Electricity Duty Act undoubtedly governs the mechanism of exemption; however, it also enables the grant of such exemption. The policy, in effect, represented that such statutory power would be exercised in favour of eligible projects. The State cannot now be permitted to rely upon its own failure to issue a notification as a defence to defeat a promise consciously made. To accept such a contention would render all policy assurances illusory, enabling the State to invite investment on the strength of representations and thereafter avoid compliance by inaction.”

Considering this framework, the Court turned to the statute itself and noted that it explicitly enables the State to grant exemptions. It quoted:

“where the State Government is of the opinion that it is necessary or expedient in the public interest so to do, it may, by notification in the Official Gazette, exempt fully or partially, whether prospectively or retrospectively, from payment of electricity duty payable on energy consumed by any consumer or class of consumers, without any condition or with such condition as may be specified in the notification.”

At the same time, the Court did not treat the Solar Policy, 2019 as a mere statement of intent. It viewed it as a concrete assurance aimed at attracting investment into the renewable energy sector. It observed:

“This assurance, from plain language of the policy, was neither vague nor aspirational. It was a time-bound fiscal representation for a limited period of 7 years intended to induce investment in the renewable energy sector.”

The court found that UltraTech had acted upon this assurance and made significant investments and held that the requirements of promissory estoppel stood satisfied. It noted:

“The essential ingredients of promissory estoppel, i.e., a clear representation, intention to induce action, actual reliance, and resulting detriment, stand satisfied.”

The court also emphasised the broader constitutional context of renewable energy incentives, observing:

“Promotion of renewable energy is intrinsically linked to the right to a clean and healthy environment under Article 21 and to the broader principles of sustainable development and management. Incentives such as electricity duty exemptions are not mere fiscal concessions but instruments through which the State discharges its constitutional and international commitments in relation to climate change and environmental protection. Arbitrary withdrawal of such incentives undermines not only investor confidence but also the constitutional ethos of fairness and non-arbitrariness.”

Balancing the statutory framework with these equitable principles, the court held that while the State retains the power to change policy, such changes cannot retrospectively divest accrued rights. It ruled.

“we are satisfied that, no doubt, while the State can alter/amend/withdraw its policy in the larger public interest and/or fiscal requirements, but cannot take away accrued rights.”

Accordingly, the court held that the petitioners are entitled to the benefit of exemption under the Solar Policy, 2019 “only in respect of those projects that have already been commissioned prior to the impugned amendment. The said amendment cannot operate retrospectively to divest accrued rights and can only have prospective effect.”

The petitions were allowed to this limited extent.

For Petitioner: Senior Advocate Vikas Balia, assisted by Advocates Mridul Chakravarty, Sharad Kothari, Lakshyajit Singh Badhwal, Sachin Saraswat, Shridhar Mehta, Abhishek Aggarwal for Advocate T.C. Sharma, Sunil Joshi, Kuldeep Bishnoi, Ankur Mathur, Kalpit Shishodia, Chirag Soni, Samikrith Rao, Kunal Kaul, Abhishek Howt, Dinesh Kumar Bishnoi, Priyansh Arora, Gopal Sandu, Varsha Paliwal, Yashraj Singh Kanawat, Lakshya Bagadwat, Punit Choudhary, Manish Priyadarshi, Ayush Goyal, Vijay Bishnoi, Sachin Lohia.

For Respondent: Advocate General Rajendra Prasad, assisted by Advocates Anirudh S. Shekhawat, Dheerendra Singh Sodha, Anurag Jyani for Additional Advocate General Mahaveer Bishnoi, Harshwardhan Singh Chundawat, Arpit Samaria for Additional Advocate General Nathu Singh Rathore, Manvendra Singh, Bhavyadeep Singh.