Administrative Circulars Cannot Dilute Statutory Exemptions: Supreme Court Holds Crude Degummed Soyabean Oil is NOT an “Agricultural Product” — Commentary on Noble Resources & Trading India Pvt. Ltd. v. Union of India (2025 INSC 684)

1. Introduction

In Noble Resources & Trading India Pvt. Ltd. (formerly Andagro Services Pvt. Ltd.) v. Union of India, Civil Appeal No. 2572 of 2025, the Supreme Court of India examined whether (a) crude degummed soyabean oil qualifies as an “agricultural product” excluded from a customs exemption, and (b) an administrative circular may expand the scope of that exclusion beyond the parent notification.

The appellant, a two-star export house, imported crude degummed soyabean oil under a Duty-Free Credit Entitlement Certificate (DFCEC) granted pursuant to para 3.7.2.1(vi) of the Export-Import (EXIM) Policy 2002-2007. Customs authorities denied exemption, relying on:

• Notification No. 53/2003-Cus. dated 01-04-2003, which exempts “goods … other than agricultural and dairy products.”
• CBIC Circular No. 10/2004-Cus. dated 30-01-2004, which expanded the exclusion to cover “all products derived from agriculture/dairy origin, including crude edible oil.”

The High Court of Gujarat upheld the levy. On appeal, a two-judge Bench (Ujjal Bhuyan & Abhay S. Oka JJ.) reversed that decision, creating an important precedent on:

1. Limits of departmental circulars vis-à-vis statutory notifications; and
2. The correct legal test for classifying a product as “agricultural.”

2. Summary of the Judgment

• The CBIC circular could not lawfully broaden the exclusion in Notification 53/2003.
• Crude degummed soyabean oil is a manufactured commodity, distinct from soyabean, and therefore not an agricultural product.
• The appellant is entitled to exemption; demands totalling ₹1,00,38,321 with interest were quashed.
• High Court judgment (05-08-2019) and Assistant Commissioner’s order (09-01-2007) set aside; no costs ordered.

3. Analysis

3.1 Precedents Cited and Their Influence

1. Tata Teleservices Ltd. v. CCE (2006) 1 SCC 746 – Held that a circular cannot curtail an exemption notification. Formed the primary basis for invalidating the CBIC circular.
2. Union of India v. Inter Continental (2008) – Reiterated that departmental circulars cannot impose additional conditions not found in the statutory notification.
3. Sandur Micro Circuits Ltd. v. CCE (2008) 14 SCC 336 – Confirmed that circulars cannot “whittle down” statutory exemptions.
4. Delhi Cloth & General Mills (1963) & Pio Food Packers (1980) – Established the “distinct commodity” test for manufacture. Applied to show that crude degummed soyabean oil is a new product.
5. Cynamid India Ltd. (1999) 3 SCC 727 – Discussed liberal construction of “agricultural product,” but court distinguished it on facts (rice husk involved no transformation).

3.2 Court’s Legal Reasoning

1. Statutory hierarchy: • Section 25(1) Customs Act empowers the Central Government (not the Board) to grant exemptions by notification.
   • Notification 53/2003 expressly excludes only “agricultural and dairy products.”
   • Circular 10/2004, an administrative instrument, cannot override or enlarge this exclusion.
2. Interpretation of “agricultural product”: • Not defined in the EXIM Policy; resort to dictionary/common-parlance meaning.
   • Must be a product in a natural, unmanufactured state, arising directly from agriculture.
   • Crude degummed soyabean oil undergoes solvent extraction, distillation and degumming— multiple industrial steps creating a new commodity.
3. Doctrine of Manufacture: • Applying the “distinct name, character, or use” test (DCM, Pio Food).
   • Soyabean loses its identity; oil falls under Chapter 15 of ITC(HS) (fats & oils).
   • Whether edible after further refining is irrelevant to the test.
4. Nexus Requirement (Broad Nexus between imports & exports): • Once oil is held eligible under the notification, its classification as a “food product” under SION suffices to satisfy nexus with exported soyabean meal extract.

3.3 Impact of the Decision

• Administrative Law: Reinforces that departmental circulars cannot amend or expand statutory instruments. This limits executive discretion and safeguards certainty for importers/exporters.
• Customs & Trade Policy: Clarifies classification of semi-processed agro-based commodities—crude edible oils imported under DFCEC are not automatically excluded.
• Industry: Edible-oil processors and large export houses can rely on DFCEC benefits without fear of denial via circulars, provided the product qualifies under the “manufacture” test.
• Future Litigation: Sets a benchmark for courts to look first at the parent notification; circulars will be struck down if they alter substantive rights.

4. Complex Concepts Simplified

Statutory Notification vs. Circular

A notification under Section 25 of the Customs Act is law—issued by the Central Government and published in the Gazette. A circular is an internal directive of the CBIC; it aids uniform administration but cannot modify the law.

Duty-Free Credit Entitlement Certificate (DFCEC)

A transferable script granted to “status holders” with >25 % export growth. It can be used to import specified goods without customs duty—subject to conditions in the EXIM Policy and the notification.

“Manufacture” Test

Courts ask: Has the input undergone transformation such that the output is seen in trade as a new product with distinct name, character or use? If yes, manufacture is satisfied.

EXIM Policy & ITC(HS)

The Export-Import Policy governs India’s trade regime. ITC(HS) is India’s 8-digit tariff classification based on the international Harmonised System (HS); Chapters 1-24 cover primary agricultural goods; Chapter 15 covers animal/vegetable fats & oils.

5. Conclusion

The Supreme Court’s ruling is a milestone in preserving the sanctity of statutory exemptions and drawing a clear boundary around administrative circulars. By recognising crude degummed soyabean oil as a manufactured, non-agricultural commodity, the Court ensured that exporters are not deprived of legitimate fiscal incentives through executive overreach.

More broadly, Noble Resources recalibrates the interplay between trade policy instruments—EXIM Policy, customs notifications, and Board circulars—thereby promoting legal certainty and easing compliance burdens in India’s foreign trade landscape.