1. Import of crude degummed soyabean oil under duty free credit entitlement — Denial of customs duty exemption — Dispute over classification as an agricultural product. (Para 4 , 5 , 6 , 16 )
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2025 Supreme(SC) 825
SUPREME COURT OF INDIA
ABHAY S. OKA, UJJAL BHUYAN, JJ.
Noble Resources And Trading India Private Limited (Earlier Known As Andagro Services Pvt. Ltd.) – Appellant
Versus
Union Of India & Ors. – Respondents
Civil Appeal No. 2572 of 2025
Decided On : 14-05-2025
Advocates appeared:
For the Appellant(s) : Mr. Vikram S. Nankani, Sr. Adv. Mr. Kumar Visalaksh, Adv. Mr. Hardik Modh, Adv. Mr. Udit Jain, Adv. Mr. Mahfooz Ahsan Nazki, AOR
For the Respondent(s): Mrs. Archana Pathak Dave, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Shashank Bajpai, Adv. Mr. Ashok Panigrahi, Adv. Mr. Raghav Sharma, Adv. Mr. Gurmeet Singh Makker, AOR
For the Appellant(s) : Mr. Vikram S. Nankani, Sr. Adv. Mr. Kumar Visalaksh, Adv. Mr. Hardik Modh, Adv. Mr. Udit Jain, Adv. Mr. Mahfooz Ahsan Nazki, AOR
For the Respondent(s): Mrs. Archana Pathak Dave, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Shashank Bajpai, Adv. Mr. Ashok Panigrahi, Adv. Mr. Raghav Sharma, Adv. Mr. Gurmeet Singh Makker, AOR
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.
Headnote:(A) Foreign Trade (Development and Regulation) Act, 1992 - Section 5; Customs Act, 1962 - Section 28 - Export-Import (EXIM) Policy, 2002-2007 - Duty-Free Credit Entitlement Certificate (DFCEC) - Appellant denied customs duty exemption on imported crude degummed soyabean oil claiming it as an agricultural product - Court held that the exclusion of agricultural products does not encompass crude degummed soyabean oil which is a distinct manufactured product. (Paras 36, 58)
(B) Legal Principle - The statutory notification regarding customs duties cannot be restricted or modified by subsequent circulars issued by the authorities, thereby asserting the autonomy of statutory provisions. (Paras 30, 34)
Facts of the case:
The appellant, a recognized two-star export house, imported crude degummed soyabean oil under a duty-free certificate but faced denial of exemption based on its classification as an agricultural product by customs authorities.
Findings of Court:
The Court reversed the decisions of the High Court and the Assistant Commissioner, acknowledging the uniqueness of crude degummed soyabean oil as a manufactured item.
Issues: Whether crude degummed soyabean oil can be classified as an agricultural product thereby qualifying for duty exemption under statutory notifications?
Ratio Decidendi: The Court clarified the distinction between agricultural products and manufactured goods while also asserting that administrative circulars cannot contravene or limit statutory notifications.
Result: Appeal allowed; earlier judgments set aside.
Act Referred
CONSTITUTION OF INDIA: Art.226
CUSTOMS ACT: S.25(1), S.28
FOREIGN TRADE DEVELOPMENT AND REGULATION ACT: S.5, S.6
INCOME TAX ACT: S.256(2), S.35(c), S.80(hh)
CUSTOMS ACT: S.25(1), S.28
FOREIGN TRADE DEVELOPMENT AND REGULATION ACT: S.5, S.6
INCOME TAX ACT: S.256(2), S.35(c), S.80(hh)
Legal Category Hierarchy
Table of Contents
2. Whether administrative circulars can restrict statutory exemption notifications — Whether crude degummed soyabean oil constitutes an agricultural product or a distinct manufactured commodity. (Para 7 , 13 , 14 )
3. Administrative circulars cannot whittle down statutory notifications — Manufacture involves transformation into a distinct commodity — Crude degummed soyabean oil is a manufactured product, not agricultural. (Para 29 , 30 , 32 , 33 , 34 , 35 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 )
4. Administrative circulars cannot restrict statutory exemption notifications — A product is not agricultural if it undergoes manufacture to become a distinct commodity recognized in trade. (Para 35 , 36 , 51 , 58 )
5. Appeal allowed — Impugned judgment of High Court and order of Assistant Commissioner set aside. (Para 60 )
6. Can an administrative circular restrict the scope of a statutory exemption notification?
No. A circular cannot whittle down, restrict, or add new conditions to a statutory notification. If a circular expands an exclusionary clause or imposes limitations not present in the notification, it is impermissible and has no legal consequence. (Para 31 , 33 , 34 , 35 , 36 )
7. What is the legal test to determine if a process constitutes manufacture?
Manufacture requires a transformation where the original commodity is no longer regarded as such but is recognized in trade as a new and distinct article with a distinctive name, character, or use. (Para 44 , 45 , 49 , 50 , 51 )
8. When is a product classified as an agricultural product for the purpose of customs exemptions?
An agricultural product is generally one that is the direct result of husbandry and cultivation of soil, remaining in its natural unmanufactured condition. Products that undergo manufacture to become distinct commodities are not agricultural products. (Para 53 , 54 , 55 , 56 , 57 , 58 )
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 Minerals Trading Corporation (MMTC). Therefore, it was entitled to exemption from duty under the scheme on this score as well.
8. Appellant was granted a personal hearing on 08.12.2006.
9. Thereafter, order-in-original dated 09.01.2007 was passed by the Assistant Commissioner (Gr.-VII), Customs House, Kandla (briefly ‘Assistant Commissioner’ hereinafter) whereby the demand of duty to the tune of Rs.1,00,38,321.00 raised in the show-cause notice was confirmed. In the process appellant has been denied the benefit of duty free credit en
