The Supreme Court has ruled that crude degummed soybean oil (CDSO) qualifies for the customs-duty waiver available under Notification No. 53/2003-Cus., ending a years-long dispute between the trade house Noble Resources & Trading India Pvt Ltd and the customs department.
The Bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan held that CDSO is “manufactured” and therefore cannot be treated as an “agricultural product”, the category expressly excluded from the notification’s benefits.
The controversy arose after Noble Resources, then operating under the name Andagro Services, imported two consignments of CDSO on 26 and 27 July 2006 using a Duty-Free Credit Entitlement (DFCE) certificate issued under the 2002-07 Export-Import (EXIM) Policy.
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Customs officials at the Kachchh Commissionerate issued a show-cause notice contending that CDSO was an agricultural product and therefore ineligible for the concession; they also argued that the imports lacked the requisite “nexus” to the company’s exports, which included soybean meal extract rather than oil.
A division bench of the Gujarat High Court sided with the customs department, prompting the exporter’s appeal to the Supreme Court. Before the apex court, the company argued that CDSO is a processed industrial commodity, imported through the public-sector trading arm MMTC, and thus falls squarely within the scope of the DFCE scheme. The Revenue countered that subsequent amendments to the EXIM Policy specifically barred items of agricultural origin under ITC(HS) codes 1-24.
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In its judgment, the Supreme Court noted that the EXIM Policy does not define “agricultural product.” Applying dictionary meanings and the common-parlance test, the Bench concluded that CDSO is “a product different and distinct in character and identity from soyabean” because of the chemical and mechanical processes it undergoes during manufacture.
The Court rejected the High Court’s view that merely being “derived from” soybean places CDSO within the agricultural exclusion.
Accordingly, the Court set aside the High Court order, quashed the duty demand and confirmed Noble Resources’ entitlement to exemption from basic customs duty, additional duty and special additional duty.
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