Denial of CCS Benefits for Castor Oil Exports Due to New Technical Test Change Unjustified: Bombay HC [Read Order]

In a recent ruling, the Bombay High Court held that benefits under the Cash Compensatory Support (CCS) Scheme could not be denied to a castor oil exporter merely because of a change in the method of quality testing. The court directed the government to refund over Rs. 4.33 crore to the petitioner, ruling that the change in test did not alter the nature of the product being exported.

Sanjay Kumar Agarwal, the liquidator of Biotor Industries Ltd, filed a writ petition challenging an order passed by the Joint Director General of Foreign Trade rejecting the company’s claim for CCS benefits for castor oil exports made between 22.06.1989 and 08.05.1991. The refund was denied on the ground that the exported product, labelled as “Castor Oil First Special,” could not be treated as “Castor Oil Medicinal” under the scheme after a change in the government’s testing standard.

The petitioner’s counsel argued that the only change was in the testing method, from the earlier Carbon Disulphide Test to the newer Thin-Layer Chromatographic (TLC) Test, introduced by a government circular in June 1989. They claimed that the product remained the same and that similar goods had always been classified as “Castor Oil Medicinal” prior to the test change. They also relied on an earlier decision of the same High Court in his own case related to duty drawback, where the court had accepted that “Castor Oil First Special” was equivalent to “Castor Oil Medicinal.”

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The government’s counsel argued that the earlier decision related to the duty drawback scheme and not to the CCS scheme. They also submitted that after the new test was introduced, the product no longer qualified as “Castor Oil Medicinal.” It was further argued that the petitioner had not properly challenged the earlier rejection order.

A division bench led by Justice Jitendra Jain observed that the earlier ruling on duty drawback applied equally to the present case, as the core issue was the same. The court also referred to several judgments which held that benefits under government schemes could not be denied for export contracts executed before a change in rules or testing procedures.

The court pointed out that the relevant circular in May 1991 eventually recognized both “Castor Oil Medicinal” and “Castor Oil First Special” as eligible for CCS benefits. The court held that the petitioner’s exports qualified for the refund, as the product had not changed in substance, only the method of testing had. It also noted that technical reports submitted by the petitioner confirmed that both names referred to the same product, and these were not disputed by the government.

The court quashed the rejection order dated 29.10.1993 and directed the government to refund Rs. 4,33,75,866 to the petitioner within eight weeks. It added that if the amount was not paid in time, interest at 6% per annum would apply from 01.09.2025 until the payment is made. The writ petition was allowed.

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