Mandatory operationalization of a dormant tax notification after the cut-off date constitutes Change in Law.

The Appellants (Rajasthan Discoms) challenged an order of the Central Electricity Regulatory Commission (CERC) dated 25.09.2019, which granted "Change in Law" compensation to Respondent No. 2 (Maruti Clean Coal and Power Limited)

The dispute arose from a Power Purchase Agreement (PPA) executed on 01.11.2013 with a bid cut-off date of 11.09.2012

While several claims were initially raised, the appeal was narrowed down to a single issue: whether the levy of "Forest Tax" (Forest Transit Fee) in Chhattisgarh constituted a "Change in Law."

The Appellants argued that since a 2002 Notification already existed prior to the cut-off date, the Respondent was only entitled to the incremental increase (from ₹7 to ₹15), rather than the full amount

1. Whether the mere existence of a 2002 Notification regarding Forest Tax, without active enforcement/recovery prior to the cut-off date, precludes a "Change in Law" claim

2. Whether the "Forest Tax" made mandatorily applicable via administrative directions after the cut-off date entitles the generator to full restitutionary compensation

The Tribunal applied Article 10.1.1 of the PPA, which defines "Change in Law" as the enactment, coming into effect, application, or interpretation of Law resulting in additional expenditure

It relied on the Supreme Court’s decision in Energy Watchdog v. CERC (2017), which established that Change in Law provisions are "restitutionary" in nature, intended to restore the affected party to the same economic position

It further applied GMR Warora Energy Limited v. CERC (2023) and Adani Power Limited v. RERC (2018), which held that additional charges payable due to notifications or directions issued by State instrumentalities after the cut-off date qualify as Change in Law events

The Tribunal rejected the Appellants' reliance on the 2002 Notification because it was not pleaded before the CERC and was introduced only during final arguments

On merits, the Tribunal found that although the 2002 Notification existed, the Forest Department’s letter dated 31.10.2012 proved that the transit fee was made mandatorily applicable only from 01.11.2012—which was after the 11.09.2012 cut-off date

The Tribunal reasoned that under Article 10.1.1, the "coming into effect" or "application" of a law is distinct from its "enactment."

Since the levy was dormant and not operationally recovered at the time of the bid, a prudent bidder could not have factored it into the tariff

The Tribunal noted the Appellants failed to provide evidence of any recovery of this tax from any generator prior to the mandatory start date of 01.11.2012

The Tribunal concluded there was no error in the Impugned Order as the tax became operationally effective only after the cut-off date. The appeal and all pending applications were dismissed