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Noble Resources and Trading India Private Limited v. Union of India

Civil Appeal · 2025 INSC 684Decided 14 May 2025
Civil Appeal No. 2572 of 2025
Justice Abhay S. Oka · Justice Ujjal Bhuyan

Background

The appellant (then known as Andagro Services Pvt. Ltd.), an export house dealing in rice, sesame seeds and soyabean products, imported crude degummed soyabean oil in 2006 under a duty-free credit entitlement certificate meant to exempt certain non-agricultural goods from customs duty. The customs department issued a show-cause notice and then demanded over Rs. 1 crore in duty, arguing the oil was an "agricultural product" (excluded from the exemption) and that it had no proper "nexus" with the goods the company exported. The Gujarat High Court upheld the demand, and the company appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held, first, that an administrative circular cannot expand or narrow the scope of a statutory exemption notification: the circular's attempt to redefine "agricultural products" to include all products "derived from" agriculture (like crude oil) had no legal effect, since it went beyond what the notification itself said. Second, applying settled tests for what counts as "manufacture" (a new, distinct commodity with its own name, character, and use must emerge), the Court found that the multi-step industrial process of converting soyabean into crude degummed soyabean oil does produce a genuinely new, distinct commercial product, so the oil is not itself an "agricultural product" excluded from the exemption. The High Court's reasoning (that soyabean "does not lose its identity" merely because oil was extracted) was rejected as applying the wrong legal test. The appeal was allowed and the demand for duty set aside.

Lesson Learnt

A government circular or clarification cannot override or restrict a benefit already granted by a formal statutory notification. If there is a conflict, the notification prevails; and whether a raw agricultural item has become a "manufactured," legally distinct product depends on whether industry recognizes it as a new commodity, not merely on whether it superficially still resembles its source.

Official source (sci.gov.in)View Judgment (PDF)

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