The exclusion of agricultural products from customs duty exemption does not apply to crude degummed soyabean oil, which is a manufactured product, not an agricultural product.

JUDGMENT :

(Ujjal Bhuyan, J.)

This appeal by special leave has been preferred against the judgment and order dated 05.08.2019 passed by the High Court of Gujarat at Ahmedabad (briefly ‘the High Court’ hereinafter) in R/Special Civil Application No.8596 of 2007.

2. On 06.12.2019, this Court had condoned the delay in filing the special leave petition and issued notice. An interim order was passed to the effect that the ad interim protection which was granted by the High Court shall continue to operate. By order dated 12.02.2025, leave has been granted.

3. Relevant facts may be briefly noted.

4. Appellant is a government recognized two star export house and a trading company engaged in the export of rice, sesame seeds, soyabean meal extracts, etc. Earlier name of the appellant was M/s Andagro Services Private Limited but has since been renamed as Noble Resources and Trading India Private Limited.

5. Under the Export-Import (EXIM) policy of 2002- 2007, which provided for exempting goods when imported into India under a duty free credit entitlement (DFCE) certificate, appellant was granted such a certificate for import of goods having a nexus with the products exported by it under the category ‘67/food products’. Under this duty free credit entitlement certificate (briefly ‘the certificate’ hereinafter), appellant imported crude degummed soyabean oil vide two Bills of Entry dated 26.07.2006 and 27.07.2006 claiming duty exemption on the basis of such certificate. The exemption claimed was in terms of para 3.7.2.1(vi) of the EXIM policy.

6. A show-cause notice dated 30.08.2006 was issued to the appellant by the Office of the Commissioner of Customs, Kachchh Commissionerate stating that under the duty free credit entitlement scheme (briefly ‘the scheme’ hereinafter) vide notification No.53/2003-Cus. dated 01.04.2003, appellant was not eligible for benefits on the import of crude degummed soyabean oil as it was an agricultural product. Since goods in the nature of agricultural and dairy products were excluded under the said notification, appellant was liable to discharge the duties as applicable. Revenue was of the further view that the import made by the appellant should have a nexus with the product group exported. One of the goods exported by the appellant was soyabean meal extract while the product imported was crude degummed soyabean oil; there was no nexus between the two. The notice therefore called upon the appellant to pay all the duties chargeable with interest.

7. Appellant responded to the show-cause notice by filing a reply dated 14.09.2006. Appellant contended that the product imported by it i.e. crude degummed soyabean oil, was not an agricultural and dairy product so as to be excluded from the notification No.53/2003. It was further contended that both the products imported and exported i.e. crude degummed soyabean oil and soyabean meal extract respectively are classified as food products. Therefore, the product imported clearly has a nexus with the product exported by the appellant. Appellant relied upon amended notifications dated 28.01.2004 and 21.04.2004 as well as para 3.2.5 of the Handbook of Procedures. Appellant explained that through a process of manufacture, the agricultural product soyabean loses its identity and becomes another product called crude degummed soyabean oil which is a distinctly marketable commodity. That apart, appellant contended that it was imported through the Metals and Min