Crude Degummed Soyabean Oil Is Not an Agricultural Product; Duty-Free Entitlement Restored

A bench of Justices Ujjal Bhuyan and Abhay S. Oka heard an appeal by special leave from a Gujarat High Court order that had upheld a demand of customs duty on imports of crude degummed soyabean oil claimed under a duty free credit entitlement certificate issued under the EXIM Policy 2002–07. The principal questions were whether the department could, by circular, narrow the scope of a statutory exemption notification and whether crude degummed soyabean oil amounted to an “agricultural product” excluded from the exemption.

The Court allowed the appeal, set aside the Assistant Commissioner’s order dated 09.01.2007 and the High Court judgment dated 05.08.2019, and held that the appellant was entitled to the benefits of notification No.53/2003-Cus. The Court held that an administrative circular could not "whittle down the exemption notification" and that the product in question underwent a manufacturing process and acquired a distinct identity. The Court, in its reasoning, observed: “Thus, having regard to the discussions made above, we record our conclusions as under: (i) The circular bearing No.10/2004 dated 30.01.2004 insofar it expands the exclusionary clause in the statutory notification No.53/2003 dated 01.04.2003 would have no legal consequence. (ii) Crude degummed soyabean oil is a product different and distinct in character and identity from soyabean. (iii) The process carried out by the appellant using soyabean as raw material and ending in the product crude degummed soyabean oil is manufacturing. (iv) Crude degummed soyabean oil is not an agricultural product. (v) Therefore, appellant would be entitled to the benefits under notification No.53/2003 dated 01.04.2003.” The Court reiterated established principles that “it was not open to the Board to whittle down the exemption notification in such a manner,” and recalled that “There must be transformation; a new and different article must emerge having a distinctive name, character or use.”

Background The appellant, a recognised two‑star export house engaged in exports including soyabean meal extract, imported crude degummed soyabean oil against a DFCE certificate issued under para 3.7.2.1(vi) of the EXIM policy and claimed exemption under notification No.53/2003. Revenue issued a show‑cause notice (30.08.2006) contending that agricultural and dairy products were excluded from the notification and that the imported oil was a product of agricultural origin not eligible for exemption; it also questioned the requisite “nexus” between imports and exported product group. The Assistant Commissioner confirmed a duty demand of Rs.1,00,38,321 on 09.01.2007. The appellant challenged the order by writ; the Gujarat High Court dismissed the petition in 2019, holding that crude degummed soyabean oil retained an agricultural identity and that circular No.10/2004‑Cus. correctly clarified the exclusion.

On appeal, the Supreme Court examined the statutory scheme (EXIM policy, Handbook of Procedures and notification No.53/2003) and the effect of Board’s circular No.10/2004. Applying authority that a circular cannot add conditions to or curtail a statutory notification, the Court held the circular lacked legal consequence insofar as it expanded the exclusion. The Court analysed the extraction process and the settled tests for “manufacture” — whether the original commodity underwent transformation to a new article recognised in trade — and concluded that crude degummed soyabean oil was a distinct, manufactured product and not an agricultural product. The Court allowed the appeal, set aside the impugned orders and restored entitlement under notification No.53/2003; it recorded no order as to costs. Earlier interim protection granted by the High Court had been continued by this Court during proceedings.

Case No.: 2025 INSC 684 Case Title: Noble Resources and Trading India Private Limited v. Union of India & Ors. Appearances: For the Petitioner(s): Senior Counsel for Noble Resources and Trading India Pvt. Ltd. (as recorded) For the Respondent(s): Additional Solicitor General for Union of India (as recorded)