20 May 2024

Solar power generation under MOOWR is valid – CBIC Instruction dated 9 July 2022 quashed

The Delhi High Court has held that the statutory scheme underlying the MOOWR Regulations cannot be construed as seeking to exclude solar power generation in terms of permissions granted under Section 65 of the Customs Act, 1962. According to the Court, neither Section 61 nor Section 65 can be justifiably construed as incorporating an inherent or implied exclusion of solar power generation.

The High Court in its decision dated 6 May 2024 further quashed the CBIC Instruction dated 9 July 2022, insofar as it mandated review of existing licenses and taking of follow-up action.

Rejecting the submission of the Department (exclusion of solar power generation from MOOWR) based on purposive interpretation, the Court observed that it would be incorrect to recreate or reassemble Section 65 so as to exclude a particular category of activity based upon the experience of its working or its perceived negative impact on the domestic industry. The Court was also of the view that construction of a statute cannot be guided or influenced by the subsequent experience of the executive or of discerned inequitable results.

Allowing the writ petition, the High Court in ACME Heergarh Powertech Pvt. Ltd. v. CBIC also observed that the mere fact that input-output ratio norms may not apply in the case of generation of electricity would not be determinative of the controversy.

Further, the Department’s submission that Section 65 only contemplates those categories of goods which are capable of being consumed in the manufacturing process or those which are worked upon in the course of manufacture, was held as fundamentally flawed and misconceived. Similarly, it was also held that the submission that capital goods must necessarily form part of the resultant goods was also misconceived.

Quashing CBIC Instruction dated 9 July 2022, the Court observed that the Instruction had the effect of deterring the licensing authority from independently examining any contention that may be addressed. The High Court for this purpose relied upon percepts of administrative law which, according to the Court, abhor abdication of an independent decision-making power as well as a quasi-judicial authority being compelled to act under the dictates of a superior authority. It was also of the view that the Instruction travelled far beyond the advisory and clarificatory function of the Board (CBIC) by virtue of Section 151A of the Customs Act, 1962.

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