The Rajasthan High Court has affirmed that while the state may amend or withdraw policy incentives, it cannot extinguish rights already accrued by beneficiaries under a lawful scheme. This judgment upholds the principle that prospective policy changes cannot nullify vested entitlements, offering critical clarity for renewable energy investors.
Background & Facts
The Dispute
The petitioners, comprising individuals, trusts, and corporate entities across Jodhpur and surrounding areas, had installed solar power projects under the Rajasthan Solar Policy 2019, which promised a full exemption from electricity duty for a period of seven years from the Commercial Operations Date (COD) of the project. The State subsequently issued an amendment to the policy, withdrawing this exemption with effect from a specified date. The petitioners challenged this withdrawal as violative of their accrued rights, arguing that they had incurred substantial capital expenditure and entered into long-term financial arrangements in reliance on the original policy terms.
Key Facts
- The Rajasthan Solar Policy 2019 was notified on 15.03.2019, offering a 100% exemption from electricity duty for seven years from COD for eligible solar projects.
- Petitioners submitted applications and received approvals under the policy between April 2019 and December 2021.
- Projects were commissioned and began commercial operations between June 2019 and November 2021, with documented CODs.
- On 18.07.2022, the Energy Department issued a notification amending the Solar Policy 2019, withdrawing the electricity duty exemption for all new and existing projects, effective from 01.04.2022.
- The Jodhpur Vidyut Vitaran Nigam Limited (JDVVNL) and other Discoms commenced recovery of electricity duty from petitioners from April 2022, despite prior approvals.
- Petitioners filed multiple representations to the Energy Department and Finance Department between August 2022 and January 2023, all of which were rejected on grounds of fiscal prudence and policy revision.
Procedural History
- 15.08.2022: First legal notice sent by petitioners to JDVVNL demanding cessation of duty recovery.
- 10.11.2022: Petitioners filed multiple writ petitions before the Rajasthan High Court, consolidated as S.B. Civil Writ Petition No. 12560/2022 and connected matters.
- 06.04.2026: Division Bench of the Rajasthan High Court delivered judgment in M/s Ultra Tech Cement Ltd. v. Energy Department (D.B. Civil Writ Petition No. 1151/2023), addressing identical issues.
- 29.04.2026: Single Judge bench in the present batch of petitions relied upon the Division Bench judgment for disposal.
The Parties' Positions
For the Petitioners
- Argued that the exemption was a statutory promise made under a policy framed under the Electricity Act, 2003, and the Rajasthan Electricity Duty Act, 2001.
- Contended that reliance on the policy led to irreversible financial commitments, including bank loans, equipment procurement, and grid-connection agreements.
- Invoked the doctrine of legitimate expectation and the principle that vested rights cannot be taken away retrospectively.
- Cited M/s Ultra Tech Cement Ltd. as binding precedent on identical facts.
For the Respondents
- Acknowledged the policy amendment was issued due to fiscal constraints and to align with national energy goals.
- Argued that policy incentives are not contractual obligations and may be modified in public interest.
- Asserted that the withdrawal was prospective and did not affect projects already completed before the amendment.
- Relied on the Division Bench judgment to support the position that accrued rights are protected only up to the COD.
Relief Sought
The petitioners sought:
- A declaration that the withdrawal of electricity duty exemption under the amended Solar Policy 2019 is void to the extent it applies to projects commissioned before 01.04.2022.
- A direction to JDVVNL to cease recovery of electricity duty for the period from COD to seven years thereafter.
- Refund of all electricity duty collected from April 2022 onwards for eligible projects.
- Costs of litigation.
The Legal Issue
The central question was whether the State of Rajasthan could retrospectively withdraw a promised electricity duty exemption under the Solar Policy 2019 from projects that had already been commissioned and were enjoying the benefit, thereby extinguishing accrued rights.
Arguments Presented
For the Petitioner
The petitioners relied on the Division Bench judgment in M/s Ultra Tech Cement Ltd. v. Energy Department, which held that while the State retains the power to amend or withdraw policy incentives, it cannot do so retrospectively to divest rights that have already accrued. They emphasized that the exemption was not a mere administrative concession but a statutory incentive designed to promote renewable energy investment. The petitioners demonstrated that their projects were commissioned and operational before the amendment, and therefore, the seven-year exemption period had already commenced. They argued that the State’s action violated the principle of non-retroactivity under Article 14 and the doctrine of legitimate expectation.
For the Respondent
The respondents conceded that the Division Bench judgment was binding and did not oppose its application to the present petitions. They acknowledged that the amendment could not be applied to projects already in commercial operation prior to 01.04.2022, as doing so would violate the settled legal principle that accrued rights are inviolable. They maintained that the withdrawal was intended to apply prospectively and that the State had no intention of denying benefits to those who had acted in good faith under the original policy.
The Court's Analysis
The Court observed that the issue had been authoritatively settled by the Division Bench in M/s Ultra Tech Cement Ltd. v. Energy Department, and both parties agreed to be bound by its reasoning. The Division Bench had held that while policy incentives are not contractual, they create legitimate expectations that the State is bound to honor when beneficiaries have acted in reliance. The Court emphasized that the exemption under the Solar Policy 2019 was not a discretionary grant but a structured incentive designed to attract investment in solar energy.
"No doubt, while the State can alter/amend/withdraw its policy in the larger public interest and/or fiscal requirements, but cannot take away accrued rights. Thus, the petitioners herein are entitled to the limited benefit of the exemption promised under the Solar Policy, 2019, only in respect of those projects which have already been commissioned prior to the impugned amendment. The said amendment cannot operate retrospectively to divest accrued rights and can only have prospective effect."
The Court noted that the amendment’s effective date of 01.04.2022 could not be applied to projects whose COD was earlier, as this would amount to retrospective operation. The principle of non-retroactivity is deeply embedded in administrative law and constitutional jurisprudence, particularly where financial commitments have been made in reliance on state assurances. The Court further held that the remedy lies in verifying the exact COD of each project and granting the exemption for seven years from that date, as directed in the precedent.
The Verdict
The writ petitions were disposed of in terms of the Division Bench judgment dated 06.04.2026 in M/s Ultra Tech Cement Ltd. v. Energy Department. The petitioners are entitled to the electricity duty exemption for seven years from the Commercial Operations Date (COD) of their respective solar projects, provided such COD preceded 01.04.2022. JDVVNL is directed to cease recovery of electricity duty for eligible projects and to refund all amounts collected from April 2022 onwards. The Discoms must verify the COD of each project within six weeks and issue revised bills accordingly. Costs of Rs. 50,000 per petition are awarded to the petitioners.
What This Means For Similar Cases
Accrued Rights Under Policy Incentives Are Legally Enforceable
- Practitioners representing renewable energy investors must now assert that any policy withdrawal affecting projects already commissioned is void to the extent it operates retrospectively.
- Documentation of Commercial Operations Date (COD) is critical - clients must maintain commissioning certificates, grid-connection approvals, and power generation logs.
- Recovery of duties collected after COD but before policy amendment must be challenged immediately with a claim for refund.
State Policies Create Legitimate Expectations
- Government incentives framed under statutory frameworks (e.g., Electricity Act, State Renewable Policies) are not mere administrative announcements but create enforceable expectations.
- Even if a policy states it is subject to change, courts will protect rights already accrued if beneficiaries have acted in good faith.
- Future policy amendments must include a clear grandfathering clause for existing projects to avoid litigation.
Procedural Compliance Is Non-Negotiable
- Discoms cannot unilaterally deduct duties without verifying eligibility under the original policy terms.
- Any demand notice issued after policy amendment must specify whether the project qualifies for exemption based on COD.
- Legal notices demanding refund must be sent within three months of unlawful deduction to preserve limitation rights.
