Customs Duty Exemption On Crude Degummed Soyabean Oil: Supreme Court
Customs Duty Exemption On Crude Degummed Soyabean Oil: Supreme Court
The Supreme Court has held that the Customs Duty Exemption is available on Crude Degummed Soyabean Oil which is not an agricultural product.
The bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan has observed that Crude degummed soyabean oil is a product different and distinct in character and identity from soyabean. The process carried out by the appellant using soyabean as raw material and ending in the product crude degummed soyabean oil is manufactured. Crude degummed soyabean oil is not an agricultural product. Therefore, appellant would be entitled to the benefits under notification No.53/2003 dated 01.04.2003.
The Notification No. 53/2003 dated 01.04.2003 agriculture and dairy products were excluded from the exemption to payment of customs duty and additional duty. However, the circular bearing No.10/2004 dated 30.01.2004 expanded the exclusion by adding the words ‘any product derived from agricultural origin’.
The 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.
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 the duty free credit entitlement certificate, 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.
A show-cause notice was issued to the appellant by the Office of the Commissioner of Customs, Kachchh Commissionerate stating that under the duty free credit entitlement scheme 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 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.
A Division Bench of the High Court dismissed the writ petition filed by the petitioner by upholding the levy of demand. After pronouncement of the judgment, on the prayer made on behalf of the appellant, the Division Bench of the High Court extended the interim relief which was granted earlier in the writ proceeding for a period of four weeks
The 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.
The department contended that the condition mentioned in the notification would have to be read in terms of the EXIM policy 2002-2007, as amended from time to time. He has referred to a subsequent notification bearing No. 38 dated 21.04.2004 whereby the EXIM policy was amended by insertion of Note 7 which clearly stated that agricultural products falling under item 1-24 of ITC (HS) will not be allowed for import under the scheme.
The issue raised was whether appellant was entitled to exemption from customs duty, additional duty and special additional duty in terms of the notification No. 53/2003-Cus. dated 01.04.2003.
The court noted that the expression ‘agricultural product’ is not defined in the EXIM policy. Therefore, to understand the expression ‘agricultural product’, reference would have to be made to the dictionary meaning and also what is understood as an ‘agricultural product’ by applying the common parlance test.
Therefore, applying the test, the Apex Court was unable to concur with the view expressed by the High Court that crude degummed soyabean oil is an agricultural product.
The court allowed the appeal and quashed the judgment and order of the High Court.
Case Details
Case Title: Noble Resources And Trading India Private Limited Versus Uoi
Case No.: Civil Appeal No. 2572 Of 2025
Date: May 14, 2025
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
