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The State of Maharashtra v. Reliance Industries Ltd.

Civil Appeal · 2026 INSC 296Decided 25 Mar 2026
C.A. No.-003012-003026 - 2010
Justice Pamidighantam Sri Narasimha · Justice Alok Aradhe

Background

Under the Bombay Electricity Duty Act, 1958, Maharashtra had granted industries exemption from paying electricity duty on power generated by their own captive power plants, starting in 1994. In 2000 and 2001, the State issued fresh notifications withdrawing or curtailing this exemption. Reliance Industries and other captive power generators, who had organised their operations around the earlier exemption, challenged these withdrawal notifications, and the Bombay High Court struck them down. The State then appealed to the Supreme Court, arguing it had full statutory power to modify or withdraw such tax exemptions.

Decision Breakdown

The Supreme Court held that the State Government does have the statutory power under Section 5A of the Act to withdraw or modify an exemption it had earlier granted: a concession is not permanent just because it was once given. However, the Court also held that principles of fairness and legitimate expectation require that such withdrawal not cause undue hardship to businesses that had structured their financial and operational affairs around the earlier concession; a reasonable transition period should be given before the withdrawal takes effect. Balancing these two principles, the Court quashed the High Court's judgments striking down the notifications outright, but ruled that the 2000 and 2001 notifications would only take effect after a one-year notice period from their respective dates, giving affected industries time to adjust.

Lesson Learnt

A government can lawfully withdraw a tax concession or exemption it earlier granted, but where businesses have reasonably relied on that concession to structure their affairs, fairness requires the government to provide reasonable advance notice before the withdrawal takes effect, rather than an abrupt, retrospective reversal.

Official source (sci.gov.in)View Judgment (PDF)

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