14 May 2025 Civil Appeals >> Civil & Consumer Law  

In a significant ruling on May 14, 2025, the Supreme Court of India addressed a long-standing dispute between Noble Resources And Trading India Private Limited (formerly Andagro Services Pvt. Ltd.) and the Union of India, overturning a High Court judgment and an earlier order from the Assistant Commissioner of Customs. The case, Civil Appeal No. 2572 of 2025, centered on whether "crude degummed soyabean oil" should be classified as an "agricultural product," thereby affecting its eligibility for duty exemption under the Export-Import (EXIM) policy of 2002-2007.

Background of the Dispute:

Noble Resources, a recognized two-star export house, imported crude degummed soyabean oil under a duty-free credit entitlement (DFCE) certificate, claiming exemption from customs duty. This claim was based on paragraph 3.7.2.1(vi) of the EXIM policy and Notification No. 53/2003-Cus. dated April 1, 2003, which exempted certain imported goods from customs and additional duties.

However, a show-cause notice issued by the Commissioner of Customs argued that crude degummed soyabean oil was an "agricultural product" and thus excluded from the benefits of the DFCE scheme under Notification No. 53/2003, as agricultural and dairy products were explicitly excluded. The Customs authorities further contended that there was no "nexus" between the imported crude degummed soyabean oil and the appellant's exported products like soyabean meal extract.

The Assistant Commissioner of Customs confirmed the duty demand of over Rs. 1 crore, a decision upheld by the High Court of Gujarat at Ahmedabad. The High Court reasoned that while the process of converting soyabean to crude degummed soyabean oil might be termed manufacturing, the original agricultural identity of soyabean was not lost, and the oil was not fit for direct human consumption without further refining.

Appellant's Contentions:

Noble Resources argued that crude degummed soyabean oil is not an "agricultural product." They emphasized that a manufacturing process transforms soyabean into a distinct marketable commodity, losing its original identity. The appellant also pointed out that the imported oil, classified under Chapter Heading 15 of ITC (HS) (Indian Trade Classification - Harmonized System), was imported through MMTC (Metals and Minerals Trading Corporation), which was permitted by a subsequent public notice.

Crucially, the appellant challenged the departmental circular (Circular No. 10/2004-Cus. dated January 30, 2004) which expanded the exclusion clause of the statutory notification to include "any product derived from agriculture or having dairy origin." They argued that a circular cannot narrow down or whittle away the scope of a statutory exemption.

Supreme Court's Analysis and Verdict:

The Supreme Court meticulously analyzed the arguments, focusing on two key aspects: the validity of the circular and the definition of an "agricultural product" in the context of manufacturing.

Firstly, the Court affirmed the principle that a departmental circular cannot restrict or add conditions to a statutory notification. Therefore, Circular No. 10/2004-Cus., which broadened the exclusion of agricultural and dairy products, was deemed to have "no legal consequence" insofar as it expanded the statutory notification.

Secondly, on the definition of "agricultural product" and "manufacture," the Court referred to established legal precedents. Citing Union of India vs. Delhi Cloth and General Mills Co. Ltd. and Deputy CST vs. Pio Food Packers, the Court reiterated that "manufacture" implies a transformation where a "new and different article must emerge having a distinctive name, character or use." The Court also highlighted that the test is not whether the end product is consumable, but whether it has a distinct identity.

Considering the detailed manufacturing process of crude degummed soyabean oil from soyabean (including cleaning, cooking, flaking, extraction with solvent, and separation), the Supreme Court concluded that the process results in a "completely different marketable commodity having an identity distinct from soyabean." While soyabean is an agricultural product, crude degummed soyabean oil is not.

Conclusion:

Based on its analysis, the Supreme Court concluded that:

• Circular No. 10/2004-Cus. had no legal effect in expanding the exclusionary clause of Notification No. 53/2003.
• Crude degummed soyabean oil is a distinct product from soyabean, and its production involves manufacturing.
• Consequently, crude degummed soyabean oil is not an agricultural product.

Therefore, Noble Resources And Trading India Private Limited is entitled to the benefits under Notification No. 53/2003. The Supreme Court allowed the appeal, setting aside the High Court's judgment and the Assistant Commissioner's order, bringing clarity to the classification of processed agricultural derivatives under customs law. 

Section 28, Customs Act - 1962  

Customs Act, 1962