Post-bid imposition of taxes qualifies as Change in Law event necessitating restitutionary relief.

The Appellant entered into a Power Purchase Agreement (PPA) with Respondent No. 2 (TSSPDCL) on 03.03.2015 to establish a 30MW solar project

The financial bid was submitted on 13.10.2014, during which time the Andhra Pradesh Tax on Entry of Goods into Local Areas Act, 2001 had been declared unconstitutional by the High Court

However, on 11.11.2016, a nine-judge bench of the Supreme Court in Jindal Stainless Steel Ltd. v. State of Haryana upheld the validity of Entry Tax laws

Subsequently, the Commercial Tax Officer issued assessment orders in 2020 imposing Entry Tax on the Appellant for FY 2015-16 and 2016-17

The Appellant filed a petition before Respondent No. 1 (Commission) seeking a declaration that this tax constituted a "Change in Law" (CIL) event under Article 1.12 of the PPA

The Commission dismissed the petition on 04.10.2021, holding that the PPA provided for a static tariff inclusive of all taxes

The Tribunal applied the "Business Efficacy" principle, which mandates that terms be implied in a contract to produce the results intended by prudent businessmen and avoid a failure of consideration

It relied on the "Penta-test" from Nabha Power Limited v. Punjab State Power Corporation Limited for the strict interpretation of implied terms in commercial contracts

The Tribunal further applied the principle from Energy Watchdog v. CERC, which established that the National Tariff Policy is a statutory document under Section 3 of the Electricity Act, 2003, carrying the force of law

Clause 4.2.4 of the National Tariff Policy, 2016, was also applied, requiring that changes in duties or cess leading to financial impact be treated as a pass-through unless expressly prohibited by the PPA

The Tribunal found that the Commission’s narrow interpretation of the PPA flouted "business commonsense"

It reasoned that since the Entry Tax was unconstitutional at the time of bidding, the Appellant could not have factored it into the quoted tariff

The Tribunal distinguished between Article 2.2 ("quoted tariff") and Article 2.3 ("tariff payable"), noting that the latter's inclusion of taxes "as applicable from time to time" implies a dynamic adjustment for future legislative levies

Applying the "Penta-test," the Tribunal held that Article 1.12 (Change in Law) must be interpreted broadly to include fresh tax enactments, as a contrary view would render the CIL clause redundant and the PPA inequitable

It further held that under the National Tariff Policy 2016, such taxes must be pass-through events

Finally, the Tribunal clarified that the absence of a specific restitution clause does not preclude relief, as the right to restitution is a natural corollary of a CIL event

The Appellant was declared entitled to consequential restitutionary relief

The case was remanded to the Commission to determine the specific extent of restitution, with a direction to pass necessary orders within two months