Bombay High Court Rules on Castor Oil Export Incentives: Equivalence of Grades Affirmed.


12 June 2025 Civil Appeals >> Civil & Consumer Law  

In a recent decision of Sanjay Kumar Agarwal & Another Vs Union of India, Through the Under Secretary Government of India, New Delhi & Others, the Bombay High Court allowed a petition challenging the rejection of a Cash Compensatory Scheme (CCS) refund application for "Castor Oil First Special Grade." The core dispute revolved around whether "Castor Oil First Special Grade" could be equated with "Castor Oil Medicinal" for the purpose of receiving CCS benefits, particularly after a change in the prescribed testing method.

The petitioner had sought a refund for exports made between July 3, 1989, and May 7, 1991. The CCS, introduced in 1966 to incentivize exports, offered a 5% Free On Board (FOB) rate for "Castor Oil Medicinal" from April 1, 1989, to March 31, 1992. Previously, "Medicinal" grade castor oil was identified by the 'Carbon Disulphide Test.' However, on June 23, 1989, the government superseded this, introducing the 'Thin-Layer Chromatographic Test' (TLC) for identifying Medicinal grade Castor Oil. Following this, the petitioner's "Medicinal" grade oil was re-graded as "Castor Oil First Special." A Circular dated May 8, 1991, later clarified that "Castor Oil First Special" would be eligible for CCS, but this led to the denial of benefits for the period between the test change and the clarification.

 
 

The petitioner argued that a Co-ordinate Bench of the same High Court, in the petitioner's own case concerning duty drawback, had already ruled that "Castor Oil First Special" qualifies as "Castor Oil Medicinal." They contended that a mere change in the test methodology does not alter the fundamental nature of the goods. Furthermore, the contracts for the exports in question were executed prior to the introduction of the new TLC test. The petitioner also submitted uncontroverted technical reports from expert authorities confirming that "Castor Oil Medicinal" remained the same product despite the change in testing.

The respondent, conversely, argued that the previous ruling was specific to duty drawback and not applicable to the CCS, and that post-new test, the product was indeed different.

The High Court, after considering the arguments, found that the controversy was identical to the one addressed in the earlier duty drawback case, and therefore, the ratio of that decision squarely applied. The Court emphasized that the nature of the goods does not change simply because a new test is introduced. It also reiterated the legal principle that contracts executed before a scheme change should not be adversely affected by subsequent modifications. Crucially, the Court noted that a later Circular dated May 8, 1991, specifically amended the entry to "97. Castor Oil Medicinal/First Special-5%", effectively confirming the identical nature of the two descriptions.

Consequently, the High Court quashed the rejection order dated October 29, 1993, and directed the respondents to pay the petitioner the Cash assistance of Rs. 4,33,75,866/- within eight weeks. Failure to do so would result in the amount accruing interest at 6% per annum from September 1, 2025.