State cannot retrospectively withdraw promised electricity duty exemptions for solar projects already commissioned.

The State of Rajasthan introduced the Solar Policy, 2019, to promote renewable energy, which included a specific assurance under Clause 16.4 for a seven-year exemption from electricity duty starting from the Commercial Operation Date (COD)

Relying on this sovereign representation, Petitioner No. 1 (UltraTech) invested approximately ₹89 crores in setting up captive solar power plants for its units at Aditya Cement Works and Kotputli Cement Works

While the Rajasthan Electricity (Duty) Act, 1962, governs the levy and exemption of such duties via notifications, the State had historically extended these exemptions through periodic notifications, the last of which expired on 31.03.2020

On 10.05.2022, the State issued an amendment to Clause 16.4 of the 2019 Policy, withdrawing the fixed seven-year exemption and making it subject to future government notifications

Consequently, the respondents began levying electricity duty on the petitioners’ solar-generated power. The petitioners challenged this amendment, citing the doctrines of promissory estoppel and legitimate expectation

1. Whether the State is bound by the doctrine of promissory estoppel to honor the seven-year electricity duty exemption promised in the Solar Policy, 2019

2. Whether the amendment dated 10.05.2022, which withdrew the fiscal incentive, can be applied retrospectively to projects commissioned before the amendment

3. Whether the State’s failure to issue a statutory notification under the Act of 1962 can be used as a defense to defeat a promise made in an executive policy

Section 3(3) of the Rajasthan Electricity (Duty) Act, 1962, which empowers the State to grant duty exemptions in the public interest

The court primarily considered the equitable doctrine of Promissory Estoppel, as established in Motilal Padampat Sugar Mills v. State of U.P., which prevents the government from resiling from a clear representation that induced a party to act to its detriment

The court further applied the principle of Legitimate Expectation, referencing Navjyoti Co-op. Group Housing Society v. Union of India, to ensure substantive fairness in administrative action

While the State has the power to amend economic policies, such changes cannot retrospectively divest accrued or vested rights without an overriding public interest, as any arbitrary withdrawal of a specific assurance violates Article 14 of the Constitution

The Court observed that the Solar Policy, 2019, contained a "concrete fiscal incentive" intended to attract capital investment in a high-upfront-cost sector

The petitioners satisfied the requirements of promissory estoppel by making substantial investments (₹89 crores) based on the State’s unequivocal promise of a seven-year exemption

The Court rejected the State's defense that exemptions require a statutory notification under the 1962 Act, holding that the State cannot rely on its own "inaction" or failure to issue a notification to defeat a promise consciously made in a policy

Regarding the "public interest" defense, the Court found the State’s claim of financial constraints to be a "bald assertion" lacking substantive evidence to outweigh the inequity caused to investors

The Court concluded that the 10.05.2022 amendment was "manifestly arbitrary" and could only operate prospectively; it could not take away "accrued rights" of projects commissioned prior to the amendment

The Court held that petitioners are entitled to the seven-year exemption from electricity duty provided their projects were commissioned prior to the 10.05.2022 amendment

The Court granted liberty to the petitioners to verify their exact Commercial Operation Dates (COD) with the competent authority, which must then pass reasoned orders granting the exemption for seven years from the respective COD if the projects preceded the amendment. Connected petitions by associations were similarly disposed of with liberty for individual members to prove their CODs