The Supreme Court has ruled that crude degummed soybean oil is not an agricultural product but a manufactured commodity, making it eligible for customs duty exemption.
In a recent judgment, the Supreme Court of India clarified that crude degummed soybean oil does not qualify as an agricultural product because it undergoes a manufacturing process that fundamentally changes its nature. This ruling was delivered by a bench comprising Justices Abhay S. Oka and Ujjal Bhuyan, who set aside the Gujarat High Court's view that the product retained its agricultural character.
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The primary question before the Court was whether crude degummed soybean oil, derived from soybeans through a series of processes, could still be classified as an agricultural product. The Gujarat High Court had previously held that the product maintained its agricultural nature because it was derived from soybeans and was not fully refined for consumption.
The Supreme Court disagreed with the High Court's perspective, emphasizing that crude degummed soybean oil is a result of a manufacturing process. The bench relied on the definition of an "agricultural product" stated by the Kerala High Court in P. Narayanan Nair Vs. Dr. Lokeshan Nair, AIR 2014 Ker 141, which explained that an agricultural product must be the direct outcome of cultivation and remain in its natural, unprocessed form.
To determine whether crude degummed soybean oil was a manufactured product, the Supreme Court applied the test of "manufacture" established in two key cases:
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- Union of India v. Delhi Cloth and General Mills Co. Ltd. (1963)
- Deputy CST v. Pio Food Packers (1980)
According to this test, a product is considered manufactured if:
- It undergoes a process or series of processes.
- The raw material is transformed through these processes.
- A new commodity emerges as a result.
- This new commodity has a distinct name, character, or use.
- It is recognized as separate in the trade and market.
The Court noted that crude degummed soybean oil is not simply a processed form of soybean but a distinct marketable product with its own identity. Highlighting this distinction, the Court observed:
"The test is not whether the end product is a consumable product or not. Therefore, the High Court clearly missed the point by holding that because crude degummed soybean oil was not further refined, it did not have a distinct identity."
The bench further emphasized:
"While there is no dispute that soybean is an agricultural product, crude degummed soybean oil is distinct from soybean; it is not the same thing as soybean."
In conclusion, the Supreme Court allowed the appeal, ruling that crude degummed soybean oil is a manufactured product and not an agricultural product. This classification makes it eligible for customs duty exemption under the relevant notification.
Case Title: NOBLE RESOURCES AND TRADING INDIA PRIVATE LIMITED (EARLIER KNOWN AS ANDAGRO SERVICES PVT. LTD.) VERSUS UNION OF INDIA & ORS.
Appearance:
For Petitioner(s) :Mr. Vikram S. Nankani, Sr. Adv. Mr. Kumar Visalaksh, Adv. Mr. Hardik Modh, Adv. Mr. Udit Jain, Adv. Mr. Mahfooz Ahsan Nazki, AOR
For Respondent(s) :Mr. S. Dwarakanath, A.S.G. Mr. Rupesh Kumar, Sr. Adv. Ms. Priyanka Terdal, Adv. Mr. Siddharth Sinha, Adv. Mr. Kartikeya Asthana, Adv. Mr. Rajat Vaishnaw, Adv. Mr. Gurmeet Singh Makker, AOR Mrs. Archana Pathak Dave, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Ashok Panigrahi, Adv. Mr. Shashank Bajpai, Adv. Mr. Raghav Sharma, Adv.
