HC Dismisses RVUNL Appeal on Compensation Cess

Jaipur, May 25 (PTI) The Rajasthan High Court has dismissed an appeal by the Rajasthan Rajya Vidyut Utpadan Nigam Limited (RVUNL) in connection with a dispute with Adani Entreprises Limited on the issue of compensation cess.

A bench of Justices Avneesh Jhingan and Bhuwan Goyal held that RVUNL is liable to reimburse the amount paid by Adani-owned joint venture company AEL under Clean Energy Cess for coal mining.

Coal blocks were allotted by the Centre to RRVUNL which invited tenders to enter into a joint venture arrangement for the development and operation of coal blocks, transportation and delivery of coal to the thermal power stations of the Nigam.

Adani Enterprises Limited (AEL) being the successful bidder formed a joint venture company and executed a Coal Mining and Development Agreement (CMDA) for 30 years with RVUNL.

In 2010, the central government levied Clean Energy Cess (CEC) on the goods mentioned in the Tenth Schedule of the Finance Act,2010 in which coal was also one of the levied products.

The RVUNL, in accordance with the CMDA, was paying the CEC, but in 2017, the Goods & Services Tax Acts (GST) were implemented.

The Goods & Services Tax (Compensation to States) Act, 2017 was also enacted to compensate states for the loss of revenue arising from the implementation of the GST.


The CEC imposed by the Finance Act, 2010, was repealed by the Taxation Amendment Act of 2017. Thereafter, a dispute arose between the two companies on the issue of reimbursement of cess paid under the 2017 Act known as the 'compensation cess'.

The matter was referred for arbitration. While upholding the contention of the Adani company that RRVUNL is liable to reimburse compensation cess to them on the entire coal mined, the claim was allowed by the arbitrator.

The objections filed by the RVUNL under Section 34 of the Arbitration and Conciliation Act were rejected by the commercial court which held that the view taken by the arbitrator was a plausible one. Following this, the RVUNL approached the high court.

While dismissing RVUNL's appeal, the high court bench held, "The argument that reimbursable shall include only those taxes for which the Nigam has a statutory liability to pay has lacuna.

"The language is clear that service tax and other taxes to apply in future are to be paid by the company on behalf of the Nigam and shall be reimbursable."

The bench observed that the conclusion of the arbitrator is based upon reasonable construction of terms of CMDA and is plausible.

There is no patent illegality calling for interference by the High Court in the concurrent findings recorded by the arbitrator and the court, the bench said. PTI Corr