The Supreme Court ruled that crude degummed soybean oil is not an agricultural product but a distinct manufactured commodity, entitling the appellant to duty exemption under Notification No. 53/2003-Cus. The Court held that a circular (No. 10/2004) cannot expand statutory exclusions beyond the notification’s scope. It clarified that manufacturing processes creating new marketable products alter the original commodity’s identity, and exemptions must align with statutory intent, not administrative clarifications. The judgment reinforces the primacy of statutory notifications over executive circulars.
Facts Of The Case:
The appellant, Noble Resources and Trading India Pvt. Ltd. (formerly Andagro Services Pvt. Ltd.), a recognized export house, imported crude degummed soybean oil under the Duty-Free Credit Entitlement (DFCE) Scheme as per the EXIM Policy 2002-2007. The company claimed customs duty exemption under Notification No. 53/2003, which excluded only “agricultural and dairy products.” However, customs authorities denied the exemption, arguing that soybean oil was derived from an agricultural product (soybean) and thus ineligible.
A show-cause notice (2006) demanded duty payment, which the Assistant Commissioner (Customs) upheld in 2007, ruling that the oil retained its agricultural character. The appellant challenged this before the Gujarat High Court, which dismissed (2019) the petition, agreeing that soybean oil remained an agricultural product despite processing.
The Supreme Court, however, overturned this decision, holding that crude degummed soybean oil undergoes manufacturing processes, transforming it into a distinct commercial product no longer identifiable as an agricultural commodity. It also ruled that Circular No. 10/2004, which expanded the exclusion to “products derived from agriculture,” could not override the statutory notification (No. 53/2003). The Court emphasized that executive circulars cannot restrict or expand exemptions beyond what the law provides. The judgment reaffirmed the principle that manufactured goods with a new identity qualify for exemptions independent of their agricultural origins.
Procedural History:
The case originated when the Customs Department issued a show-cause notice (2006) to Noble Resources, demanding payment of customs duty on imported crude degummed soybean oil, denying exemption under Notification No. 53/2003. The Assistant Commissioner of Customs, Kandla (2007) upheld the demand, ruling that the oil was an agricultural product. The appellant challenged this order before the Gujarat High Court via a writ petition (Special Civil Application No. 8596 of 2007). In 2019, the High Court dismissed the petition, agreeing with the revenue authorities that the oil retained its agricultural character despite processing.
The appellant then approached the Supreme Court by filing a special leave petition (Civil Appeal No. 2572 of 2025), which was admitted in 2025. The Supreme Court, in its judgment dated May 14, 2025, reversed the High Court’s decision, holding that the processing of soybean into crude degummed oil constituted manufacture, creating a distinct product eligible for exemption. The Court also struck down Circular No. 10/2004, clarifying that executive instructions cannot override statutory notifications.
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Court Observation:
In its judgment, the Supreme Court made several key observations while overturning the Gujarat High Court’s decision. The Court emphasized that crude degummed soybean oil undergoes a manufacturing process that fundamentally alters the identity of the original agricultural commodity (soybean), resulting in a new and distinct marketable product. It rejected the revenue’s argument that the oil retained its agricultural character, noting that processing transforms the commodity into an entirely different category under trade and commercial parlance.
The Court also held that Circular No. 10/2004, which sought to expand the exclusion of “agricultural products” to include derivatives like crude edible oils, was ultra vires the parent Notification No. 53/2003. It reiterated that executive circulars cannot override or modify statutory notifications, as doing so would amount to legislating by administrative fiat. The judgment reinforced the principle that exemption clauses must be interpreted strictly as per statutory language, without allowing revenue authorities to impose additional restrictions.
Additionally, the Court clarified that the “common parlance test” must be applied to determine whether a processed commodity retains its original classification. Since crude degummed soybean oil is commercially recognized as distinct from raw soybean, it cannot be denied exemption merely due to its agricultural origin. The ruling thus safeguards tax exemptions for manufactured goods while curbing arbitrary administrative interpretations.
Final Decision & Judgement:
The Supreme Court allowed the appeal, setting aside the Gujarat High Court’s 2019 judgment and the Assistant Commissioner’s 2007 order, and ruled in favor of Noble Resources. The Court held that crude degummed soybean oil is not an agricultural product but a manufactured commodity, making it eligible for duty exemption under Notification No. 53/2003-Cus. It struck down Circular No. 10/2004-Cus for impermissibly expanding the scope of excluded goods beyond the statutory notification. The judgment reinforced that executive circulars cannot override statutory exemptions and emphasized that processed goods with distinct commercial identities qualify for benefits irrespective of their agricultural origins. The Court ordered that the appellant was entitled to the claimed exemption, quashing all pending duty demands. No costs were awarded.
Case Details:
Case Title: Noble Resources and Trading India Private Limited vs. Union of India & Ors. Citation: 2025 INSC 684 (Supreme Court of India) Nature of Appeal: Civil Appeal No. 2572 of 2025 Date of Judgment: May 14, 2025 Bench: Justice Abhay S. Oka & Justice Ujjal Bhuyan
Download The Judgement Here