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2019 DIGILAW 765 (GUJ)

Andagro Services Pvt. Ltd. v. Union of India

2019-08-05

ANANT S.DAVE, BIREN VAISHNAV

body2019
JUDGMENT : Biren Vaishnav, J. 1. This petition under Article 226 of the Constitution of India challenges the order dated 09.01.2007 passed by Assistant Commissioner (Gr-VII) Customs House, Kandla whereby a demand of duty of Rs. 1,00,38,321/- (One Crore Thirty Thousand Three Hundred and Twenty One Only) made under the show-cause notice dated 30.08.2006 is confirmed. The petitioner has been denied the benefit of Duty Free Credit Entitlement ('DFCE' for short) in respect of the two Bills of Entry, under notification No. 53/2003 : dated 01.04.2003. Also under challenge is the Circular No. 10/2004-Cus : dated 30th January 2004, by virtue of which the Department of Revenue issued a clarification regarding restrictions on import of agriculture and dairy products, occurring in Clause (ii)(c) of Notification of 01.04.2003. The clarification issued suggested that the term "agriculture and dairy products" shall mean that import of all types of products derived from agriculture/dairy origin including crude edible oil shall not be permitted. According to the petitioner the scope of the term "agriculture and dairy products" cannot be widened or enlarged by a circular, so as to add something in the Notification providing for exemption. 2. The challenge to the order and the clarificatory circular arises in the background of the following facts: 2.1 The petitioner is a government recognized Two Star Export House and a trading company engaged in the export of rice, sesame seeds, soyabean meal extract etc. Under the Exim Policy of 2002-2007 which provides for exempting goods, when imported into India under a Duty Free Credit Entitlement Certificate, the petitioner has been granted the "DFCE Certificate" for import of goods which have a nexus with Product Group exported under the category "67 Food Products". Under this certificate of Duty Free Entitlement, the petitioner imported Crude Degummed Soyabean Oil ("CDSO"). Having imported Crude Degummed Soyabean Oil vide the two Bills of Entry, the petitioner claimed duty exemption based on such certificate. The exemption claimed was, in accordance with para 3.7.2.1 (vi) of the Exim Policy as the petitioner had such a certificate as a status holder as specified in para 3.7.2 of the said policy. Having imported Crude Degummed Soyabean Oil vide the two Bills of Entry, the petitioner claimed duty exemption based on such certificate. The exemption claimed was, in accordance with para 3.7.2.1 (vi) of the Exim Policy as the petitioner had such a certificate as a status holder as specified in para 3.7.2 of the said policy. 2.2 A show cause dated 30.08.2006 was issued by the Office of the Commissioner of Customs, Kachchh Commissionerate that under DFCE Scheme, under Notification No. 53/2003 : dated 01.04.2003, the petitioner was not eligible for benefits under the Scheme for debits thereof on the import of Crude Degummed Soyabean Oil, as the same was an agricultural product. According to the authorities, since, "goods" in the nature of "agricultural and dairy products" was excluded from the scope of goods under the Notification, the petitioner was liable to discharge the duties as applicable on merits. The department further suggested that in accordance with the condition sheet attached to the license issued by the DGFT, the import will have a nexus with the product group exported. The sheet indicated the product group 67 Food Products, which was deleted and also as one of the goods exported by the importer was "Soyabean Meal extract", while the product imported is Crude Soyabean Oil, there was no nexus with the product group exported. The notice therefore called upon the petitioner to pay all duties chargeable with interest. 2.3 The petitioner responded by filing a reply dated 14.09.2006. It was his case that the product imported by the assessee was not "agricultural and dairy products" so as to be excluded from the Notification No. 53/2003 : dated 01.04.2003. The petitioner further contended that the product imported by them namely Crude Soyabean Oil is classified as "Food Products" under the Standard Input Output Norm (SION) and so is the exported product namely Soyabean Meal Extract and therefore the product imported clearly has a nexus with the product exported by the Noticee. The case of the petitioner also as even as per the amended notifications dated 28.01.2004 and 21.04.2004 agricultural product which fall under chapters 1-24 of ITC (HS) are not allowed for imports under Duty Free Entitlement Certificate. The case of the petitioner also as even as per the amended notifications dated 28.01.2004 and 21.04.2004 agricultural product which fall under chapters 1-24 of ITC (HS) are not allowed for imports under Duty Free Entitlement Certificate. In terms of the para 3.2.5 inserted in the Handbook of Procedures, import of agricultural product namely all edible oils classified under chapter 15 of ITC(HS) classification of Export and Import Items made through STC and MMTC was eligible to claim duty free exemption and since the petitioner was importing oils through MMTC, it was entitled to exemption under the DFCE Scheme. In the response to the show cause notice, the petitioner, in detail, explained the process of manufacture of Crude Soyabean Oil to suggest that on undergoing the manufacturing process, it becomes a distinctly marketable commodity and therefore looses the identity of Soyabean as an agricultural product. 2.4 On the second limb of the show cause notice, regarding the nexus of the product group exported, reliance was placed on para 3.2.6A (ii) and (iii) of the Handbook of Procedures. Reliance was also placed on a clarificatory circular dated 05.10.2005 which would suggest that products at serial Nos. 1 to 10 of Appendix ITD can form the relevant product category and since "Food Products" falls in one of the categories no. 1 to 10 of the SION, such import has nexus to the group "Food Products" which the petitioner exported, namely, Sesame Seeds (E/93), White Crystal Sugar (E/52 : E/79), Non-Basmati Rice (E/38) and Soyabean Meal Extract (E/42). The deletion of "67/Food Product" would, therefore, be not relevant. The petitioner, in reply to the notice, further suggested that as per Public Notice No. 44/2005 dated 26.08.2005, serial E/121, refined Soyabean Oil as an export item was correlated to the imported item crude soyabean oil and therefore fall within the same export product group "Food Products" and therefore the nexus was clearly established. 3. After granting a personal hearing on 08.12.2006, the department disagreed with the submissions of the petitioner and held that the import of Crude Degummed Soyabean Oil was in the nature of an agricultural product or a product of agricultural origin and therefore not eligible for benefits under the DFCE Scheme. Moreover, according to the department, the goods exported by the importer did not appear to have any broad nexus with the product group exported. Moreover, according to the department, the goods exported by the importer did not appear to have any broad nexus with the product group exported. As per the SION norms, soyabean meal extract which is exported, figures at E-38 for which imported items allowed is Hexane, Coal, Diesel or Kerosene. Crude Soyabean Oil which figures at E-121 has against it an export of Refined Soyabean Oil (edible grade) and therefore soyabean meal extract does not have such a nexus. There is no manufacturing undertaken or process undergone as the process of treatment of Crude Soyabean Oil and since even as per entry 1507 of chapter 15 of Central Excise Tariff, there was no refining or chemical modification and therefore it continues to remain as an agricultural product without any manufacturing process undergone. The department was also of the opinion that since special additional duty of 4% were imposed under Sub-section (1) of Section 3 of the Customs Tariff Act, 1975, the petitioner shall have to pay the special CVD in cash. Accordingly, by the impugned order dated 09.01.2007, a demand of duty of Rs. 1,00,38,321/- with interest was leviable and ordered to be paid by the petitioner. 4. Mr. Hardik Modh, learned advocate for the petitioner, has made the following submissions: (i) The exemption notification No. 53/2003 : dated 01.04.2003 provided that goods such as capital goods, office equipments, raw materials, consumables were entitled to exemption. Only goods which were agricultural and dairy products were not entitled for such exemption. Once the notification specified the scope of exclusion, the Circular dated 30.01.2004, was illegal, as no clarificatory circular could be issued enlarging or widening the scope of exclusion. (ii) Mr. Modh has invited our attention to the contents of the reply to the show-cause notice to contend that Crude Degummed Soyabean Oil can by no means be said to be an agricultural product. The process of manufacture is explained in detail and is undertaken in 4 stages and also explained by way of a diagram at page 71 of the paper book. The submission is that after undergoing a process of manufacture, the product gets transformed into a new article and becomes a distinct marketable entity which certainly cannot be termed to be an agricultural product. The submission is that after undergoing a process of manufacture, the product gets transformed into a new article and becomes a distinct marketable entity which certainly cannot be termed to be an agricultural product. Reliance was placed on the decision of the Supreme Court in the case of CIT vs. Cynamid India Ltd., reported in (1999) 3 SCC 727 in support of his contention that product remains an agricultural product if as in the facts of that case dehusking is not an industrial production. When the product loses its original identity, the extract cannot be termed as an agricultural product. Reliance was also placed on the decision of the Madras High Court in the case of C.I.T vs. Stanes Amalgamated Estates Ltd. reported in (1998) 23T ITR 443 Madras. In the case before the Madras High Court, eucalyptus plants were used to extract eucalyptus oil which lost its original identity of a plant once oil is extracted and drawing a similarity it was Mr. Modh's submission that once soyabean undergoes a process of extraction and crude soyabean oil is the end result, it cannot be termed as an agricultural product. (iii) Mr. Modh, learned advocate for the petitioner, relied on the decision of Gujarat High Court in the case of Inter Continental (India) vs. Union of India, reported in (2003) (154) E.L.T. 37 (Guj.) to support his contention that a benefit of exemption granted by way of a notification cannot be modified by mere issuance of a circular, as is done in the present case by the impugned Circular dated 30.01.2004. Mr. Modh also pressed into service a decision of the Supreme Court in the case of Sandur Micro Circuits Ltd., vs. Commissioner of Central Excise, Belgaum reported in 2008 (229) E.L.T. 641 (SC) to submit that a circular cannot take away the effect of a notifications statutorily issued. In the present case, when the notification used the words "agricultural and dairy products", the impugned circular could not have expanded the meaning and a clarification that the terms should mean all types of products derived from agriculture/dairy origin including crude oil shall not be permitted. (iv) Mr. In the present case, when the notification used the words "agricultural and dairy products", the impugned circular could not have expanded the meaning and a clarification that the terms should mean all types of products derived from agriculture/dairy origin including crude oil shall not be permitted. (iv) Mr. Modh, further assailed the impugned orders' findings that the goods imported should have a "broad nexus" with the product group exported and the authority's view that in the facts of the case, the product exported, Rice, Sesame Seeds, White Sugar and Soyabean Meal extract did not have any nexus with the food product imported, namely crude soyabean oil. Mr. Modh, drew our attention to the DFCE certificate at pages 39 and 40 of the paperbook. The sheet categorically provided the nexus with product group exported was at 67/Food Product and the food products so exported namely rice, sesame seeds, white sugar and soyabean meal extract were food products. From a separate compilation of a paperbook produced at the time of final hearing, Mr. Modh drew our attention to Public Notice No. 40 dated 28.01.2004. Attention was invited to the insertion made in para 3.2.5 of the Handbook of Procedures, particularly to para 3.2.6 A (ii) which provided that goods allowed to be imported under this Scheme i.e. under DFCE Scheme shall have a nexus with the products exported and or declaration in this regard shall be made by the applicant in Appendix 17D. Our attention was also drawn to para 3 of the public notice that imports of agricultural products which fall under Chapters 1-24 of ITC (HS) Classification of Export and Import Items will not be allowed. However, the said public notice dated 25.01.2004 was amended by one dated 06.01.2005, wherein import of all edible oils classified under chapter 15 of ITC (HS) classification of Export and Import items shall be allowed under the scheme only though STC and MMTC. The petitioner had so imported such oil through MMTC. Mr. Modh, in continuation further submitted that, as representations were received from trade and industry to clarify the scope and meaning of nexus with the product group, as contained in para 3.2.6 A, product group at serial No. 1 to 10 of Appendix 17 D, any input listed in the relevant product group of SION Group shall be within the scope of nexus with product group. Annexure to Appendix 17D of SION showed "Food Products" at serial No. 7 and therefore the contention that entry 67/Food Product was deleted, could not stand the test of legality. (v) With regard to the finding of the authority on the concept of "broad nexus", Mr. Modh relied upon the decision of the Mumbai High Court in the case of Essel Mining & Industries Ltd. vs. Union of India reported in 2011 (270) E.L.T. 308 (Bom) to suggest that once an export product and the imported item fall within the same product group in the Standard Input Output Norms (SION), it was entitled to the benefit of exemption, once it was established that the input imported i.e. CDSO. "Broad nexus" would mean goods imported with reference to any product groups of the imported goods. Admittedly, in the facts, the export goods were food products therefore product nexus was established. Reliance is placed on the decision rendered in the case of Union of India vs. Indian Exporters Grievance Forum reported in 2013 (290) E.L.T. 481 (Del). Relying on para 35 of the said judgment, Mr. Modh pointed out that "broad nexus" would also mean that if the import and export fall in the same category or product group i.e. in the present case "food product" the concept of "broad nexus" was satisfied. (vi) With regard to levy of 4% special additional duty under sub-section (5) of Section 3 of the Customs Tariff Act, 1975, to deny such a benefit merely on the count that the notification of 01.04.2003 only provided an exemption from additional duty under Sub-section (I) of Section 3 of Customs Tariff Act, 1975, was illegal. According to Mr. Modh, the notification of 01.04.2003 provided for a provision to sub-clause (b) of clause (vi) of paragraph 3.7.2.1(vi) which exempted a status holder from the whole of additional duty under sub-section (1) of section 3 of the Customs Tariff Act, 1975. Section 3A of the Customs Tariff Act, 1975 was inserted in 1998 providing for special additional duty. Section 3 of the Act was substituted with effect from 01.03.2005. Mr. Section 3A of the Customs Tariff Act, 1975 was inserted in 1998 providing for special additional duty. Section 3 of the Act was substituted with effect from 01.03.2005. Mr. Modh relied on a decision of the Supreme Court in the case of Government of India vs. Indian Tobacco Association reported in 2005 (187) E.L.T 162 to suggest that substitution/insertion would give retrospective benefit and just to place one in place of another, to replace and therefore the provision of sub-section (5) of section 3 of the Tariff Act would be deemed to be on the statute book on the date of certificate and even otherwise omitted with effect from 13.05.2005. (vii) As far as the finding of the question of Crude Soyabean Oil figuring at item E-121 as against the export of refined soyabean oil (edible grade) and not corresponding to the export of the petitioner is concerned, Mr. Modh contended that what is imported is Crude Soyabean Oil and the extract from the manufacturing process of such oil would be soyabean oil extract and therefore nexus is evident. Drawing our attention to the Input Output norms, Mr. Modh submitted that undisputedly what was imported was crude soyabean oil and refined soyabean oil export was a food product. 5. Mr. Nirzar Desai, learned advocate has appeared for the Union of India and made the following submissions: (a) The Circular dated 30.01.2004 is only a clarificatory circular and does not tend to interpret or widen the scope of the terminology "agricultural and dairy products". Taking us through the contents of the Circular dated 30.01.2004 (Annexure 'L'), Mr. Desai submitted that as the DGFT sought a clarification from the Department of Revenue whether the restriction regarding agriculture and dairy products would apply to all products derived from agricultural origin and whether import of crude edible oil be permitted, the Department issued the clarification. It was issued keeping in mind and to safeguard the interest of domestic agriculture and dairy sector. Permitting import of a product, which was otherwise an agriculture product would mean subverting tariff barrier. A clarification would not amount to taking away something which was otherwise available. It was issued keeping in mind and to safeguard the interest of domestic agriculture and dairy sector. Permitting import of a product, which was otherwise an agriculture product would mean subverting tariff barrier. A clarification would not amount to taking away something which was otherwise available. In the facts of the present case, admittedly crude degummed soyabean oil has its origin in soyabean, an agricultural product and therefore even in absence of any clarification, sub-clause (c) of clause (ii) of Notification No. 54/2003 : dated 01.04.2003 restricted import of such a commodity. (b) On the question of nexus of the export product, Mr. Desai supported the findings of the impugned order dated 09.01.2007. Relying on the factual findings of the authority, Mr. Desai submitted that the product that is exported by the petitioner is rice, white sugar and sesame seeds. In accordance with the SION norms, against export of rice import item is canvas/jute, LDPE/HDPE/PP Granules, against soyabean diesel or kerosene, against white sugar import is raw sugar and against sesame seeds import allowed is raw jute LDPE/HDPE granules. There is, therefore, nexus with the product group of export. Crude Soyabean Oil import is allowed only against export of Refined Soyabean Oil (edible grade) and not against the others and therefore the petitioner is not entitled to DFCE duty exemption. Moreover, there is no manufacturing or chemical process undertaken from crude soyabean oil to make refined soyabean oil or a chemical process and therefore soyabean and its end product soyabean meal extract essentially remain an agricultural product. (c) Reliance is placed on the Test Report No. 1112 dated 7.7.2006 of the Chemical Examiners, Customs House, Kandla annexed to the affidavit-in-reply. As per the report, the Crude Degummed Soyabean Oil (imported) can be used for human consumption after proper and thorough cleaning/refining. Relying on entry no. 1507 of chapter 15 of the Central Excise Tariff, it is submitted that the soyabean is not even chemically modified and therefore can certainly not be considered as an agricultural product nor a manufactured product. The affidavit-in-reply filed by one Farah I Gupta, Assistant Commissioner (Gr. VII) Customs House, Kandla, when read reveals that it reiterates the contentions of the impugned order dated 09.01.2007. The affidavit-in-reply filed by one Farah I Gupta, Assistant Commissioner (Gr. VII) Customs House, Kandla, when read reveals that it reiterates the contentions of the impugned order dated 09.01.2007. It is submitted that assuming without admitting that from soyabean the final product of soyabean crude edible oil can be said to be manufacturing process and therefore final product of soyabean crude oil would fall within the scope and ambit of agricultural product as it undergoes a process but then also in view of the decision of the Apex Court in the case of Shyam Oil Cake Ltd. vs. Collector of Central Excise, Jaipur reported in 2004 (174) ELT 145 SC, soyabean crude oil can be said to be an agricultural product. (d) Executive instructions can supplement a statute or cover areas to which the statute does not extend but it cannot run contrary to the statutory provisions or whittle down their effect. In support of this submission, he has relied on a decision of the Apex Court in the case Joint Committee of Airline Pilots Asso. vs. Director General of Civil Aviation. It is submitted that the aforesaid facts go to show that administrative instructions can be used to feel the gap of the areas which are not covered by the statutes and so long as they do not run contrary to the objects and provisions of the scheme the same cannot be said to be ultra vires. (e) The impugned circular is entitled to be respected unless it is patently wrong. Relying on the decision of the Apex Court in the case of Ajay Gandhi vs. B. Singh reported in 2004 (167) ELT 257 , he submitted that in the present case the petitioner has miserably failed to prove that the impugned circular is patently wrong or that it has been issued without there being any powers to issue the same or lack of legislative competence. (f) The onus is on the assessee/petitioner to show that the circular does not fall within the four corners of notification and expands the scope of the notification which the petitioner has failed to establish. Furthermore when there is doubt or two interpretations of exemption notification, are possible, the one which favours the department is to be resorted. (f) The onus is on the assessee/petitioner to show that the circular does not fall within the four corners of notification and expands the scope of the notification which the petitioner has failed to establish. Furthermore when there is doubt or two interpretations of exemption notification, are possible, the one which favours the department is to be resorted. In this regard he has relied on a decision of the Apex Court in the case of Meridian Industries Limited vs. Commissioner of Central Excise [ 2015(325) ELT 417 SC]. (g) The impugned circular does not run contrary to the statute or the scheme. On the contrary, it guides about the scheme and enables to be treated uniformly throughout the country. Once a circular if it is not in conflict with the statute, notification or the scheme, the same cannot be said to be invalid or ultra vires. Reliance in this regard is placed on the decision of the Apex Court in the case of State of Tamilnadu & Others vs. India Cements Ltd. & Others [ (2011) 13 SCC 247 ]. 6. Having heard learned advocates for the respective parties and having considered the facts in context of the progress made to quash and set aside the order dated 09.01.2007 and declare the clarificatory circular dated 30.01.2004 as violative of Article 14 and 19(1)(g), the purpose of the DFCE Scheme at the outset needs to be considered. Extracts of the EXIM Policy 2002-2007 together with relevant notifications have been provided by learned Advocate Mr. Modh by way of a separate paper book. The procedure provides that an export house having an annual incremental growth of more than 25% in FOB value of exports shall be entitled to achieving a minimum annual export turnover of Rs. 2.5 crore (in foreign exchange). Such status holders shall be entitled to duty free credit entitlement certificate to the extent of 10% of the incremental growth in exports. The duty free credit entitlement can be used for import of capital goods, office equipments and inputs, provided the same is freely importable under ITC (HS). 2.5 crore (in foreign exchange). Such status holders shall be entitled to duty free credit entitlement certificate to the extent of 10% of the incremental growth in exports. The duty free credit entitlement can be used for import of capital goods, office equipments and inputs, provided the same is freely importable under ITC (HS). A notification dated 28.01.2004 was issued by the Ministry of Commerce & Industry, Department of Commerce as per which the EXIM policy was announced with the specific objective of accelerating the incremental growth in exports and to facilitate India emerge as a major base for sourcing different products and services for the rest of the world. It was recognised that the status holders would continue playing a significant and increasing role in boosting exports. Keeping this in view, duty free entitlement at 10% of incremental growth in the value of exports was allowed. Looking to representations received from various trade associations as well as individual exporters seeking clarifications on various points, notes were inserted in paragraph 3.7.2.1 of Chapter 3. However, what is evident is that the goods that needed to be imported, keeping in mind the growth potential of exports, meant office equipments, raw materials, components, other than agricultural and dairy products. In other words, the export house could not import agricultural and dairy products. 7. It is in the background of this that the impugned circular No. 10/2004-Cus : dated 30.01.2004 was issued. Looking to the preamble of the notification of 28.01.2004 where reference is made to the fact of the initiative being new, the Director General of Trade (DGFT) sought clarification whether the restriction regarding agriculture and dairy products would apply to all products derived from agriculture/dairy origin. The Department opined that the objective of the Scheme of restricting import of agriculture and dairy products was to safeguard the interest of domestic agriculture and dairy sector and therefore higher rates of customs duties in respect of agriculture and dairy sector were specified. Therefore, even products derived from agriculture/dairy origin was not permissible lest it could mean subverting the tariff barrier specifically created to safeguard the interest of domestic agriculture and dairy industry. 7.1. Similarly in the Handbook of Procedure, para 3.2.5 was sought to have an insertion of para 3.2.6 A whereby goods allowed to be imported under the Scheme shall have a nexus with the products exported. 7.1. Similarly in the Handbook of Procedure, para 3.2.5 was sought to have an insertion of para 3.2.6 A whereby goods allowed to be imported under the Scheme shall have a nexus with the products exported. Further amendment was made to suggest relaxation of import of agricultural products provided the import of all edible oils was through STC and MMTC. This, in a nutshell is the framework and background based on which the certificate namely DFCE Certificate was granted to the petitioner and the product nexus vis-à-vis export was to be "Food Products". 8. By the impugned order, the petitioner has been denied exemption from duty on two counts: (a) That the product sought to be imported is essentially an agricultural product and therefore import thereof was impermissible. (b) That the export products of the petitioner, namely rice, sesame seeds, white sugar and soyabean extract are not having a broad nexus with the goods sought to be imported. 9. What is evident from reading of the Notification No. 53/2003 : dated 01.04.2003, is that the same is issued in exercise of powers under Section 25 of the Customs Act, 1962. Exemption is not available to goods which are agricultural and dairy products. The petitioner under the license is importing Crude Degummed Soyabean Oil. Apart from the contention that it is not an agricultural product, the alternative plea is that even if it is so, since it is imported through MMTC, the same is an import of edible oil classified under Chapter 15 of ITC (HS) and therefore permissible. From the diagram describing the manufacturing process at page 71 of the petition what is evident is that the basic ingredient/root of the product is soyabean. It is even not so disputed by the petitioner that soyabean is an agricultural product. What is sought to be canvassed is that after undergoing the process of manufacture, the crude degummed soyabean oil becomes a distinct commodity. The process which is undertaken though may be termed as a manufacturing process but what is to be seen is that soyabean as an agricultural product is a primary product which undergoes a simple operation so as to make it more useable or saleable. It can in no way be said to acquire a distinct identity. 9.1. The process which is undertaken though may be termed as a manufacturing process but what is to be seen is that soyabean as an agricultural product is a primary product which undergoes a simple operation so as to make it more useable or saleable. It can in no way be said to acquire a distinct identity. 9.1. Soyabean on extraction of oil, unlike eucalyptus oil as in the case of C.I.T vs. Stanes Amalgamated Estates Ltd., (supra), does not lose its identity. From the test report produced along with the affidavit-in-reply, what is evident is that unless the crude degummed oil is refined, it cannot be used for human consumption. Therefore, the contention that on the process so undertaken of soyabean, it acquires a distinct marketable identity is a submission bereft of merit and therefore the assessing authority finding that crude degummed soyabean oil is an agricultural product cannot be faulted. That it does not undergo a process of chemical modification is also observed based on the entry No. 1507 under chapter 15 of the Central Tariff Act that soyabean does not lose its identity. 9.2. The judgement relied upon by the petitioner in respect of Essel Mining and Industries Ltd. (supra) with regard to broad nexus is not applicable in the present case as by way of that judgement broad nexus has been defined where as in the instant case what is required to be seen is 'Nexus with product group'. Since both are different the same cannot be said to be applicable in the present case. 9.3. As per the Notification No. 53/2003 : dated 01.04.2003 issued in exercise of powers under Section 25 of the Customs Act, certain goods imported into India are sought to be exempted from customs duty on the basis of DFEC. Agricultural and dairy products do not qualify for such exemption. That the policy was in context of boosting exports is evident from paragraph no. 3.7.2.1 of the Exim Policy. Goods imported also ought to have a nexus with the products exported. Import of all edible oilseeds classified under Chapter 15 of ITC (HS) classification shall be allowed under the scheme. Whether the clarification issued by Circular No. 10/2004 : dated 30.01.2004 restricting inputs like edible oil on the pretext of it being an agricultural product, is a valid clarification and within the powers of the authorities? Import of all edible oilseeds classified under Chapter 15 of ITC (HS) classification shall be allowed under the scheme. Whether the clarification issued by Circular No. 10/2004 : dated 30.01.2004 restricting inputs like edible oil on the pretext of it being an agricultural product, is a valid clarification and within the powers of the authorities? Is it open for the respondent to issue a Circular taking away the effect of the notification statutorily issued? What is evident is that the term "agricultural products" was a matter in issue. The Exim Policy defined that such products would not be allowed for imports. As is evident from the decision in the case of Joint Action Committee of Airline Pilots (supra), when Rules are silent gaps can be filled in to supplement the rules and issue instructions. In the face of a clarification sought by the DGFT, a clarification was issued that all types of products derived from agriculture/dairy origin are not permitted to be imported. The clarification is of the Exim Policy. 10. The second ground based on which the assessee has failed is that the authority has held that the goods allowed to be imported, in this case, Crude Degummed Soyabean Oil has no nexus with the product group exported. On facts, it is found that the petitioner was exporting non-basmati rice (E/38); sesame seeds (E/93), white sugar (E/52/79) and Soyabean Meal Extract (E/42) as food products as seen from condition sheet. The SION norms as per Handbook Procedure found that for the export products of the petitioner what was the import product was anything except crude degummed soyabean oil. The defence that for the export of refined soyabean oil (edible oil) the product importable was Crude Soyabean Oil which figured at E-121 is also not covered as what is exported is not soyabean refined oil after undergoing chemical modification but it is only Soyabean Meal Extract. Even the Test Report of the laboratory vindicates the stand of the department. Even the argument of the petitioner therefore that the crude oil is being imported through MMTC, would not be of any help to the petitioner. 11. Reliance placed on SION attached to Appendix 17 D which shows the nexus of it being a Food Product holds no good as evidently it is not found consumable. Even the argument of the petitioner therefore that the crude oil is being imported through MMTC, would not be of any help to the petitioner. 11. Reliance placed on SION attached to Appendix 17 D which shows the nexus of it being a Food Product holds no good as evidently it is not found consumable. Even otherwise, there is reason behind the import of the product to have a nexus with the export product. On reading the entire DFCE Scheme it is clear that excluding exemption benefits being made available to agricultural and dairy products is to protect the domestic agricultural and dairy sector which is a predominantly rural based industry in context of the Indian economy. The nexus is to see that the agrarian economy is sustained by preventing import of such products through discouraging of duty exemptions. Moreover, in order to see incremental growth in exports, which is the purpose of the EXIM Policy, the products imported vis-à-vis the connected exports are the ones which are surplus in context of the Indian economy in juxtaposition of the import of products which the economy has a short supply. 12. Merely because the attached sheet showed the export nexus as "Food Product" would not override the SION norms for major categories. We, therefore, see no reason to find fault with the order of the authority dated 09.01.2007 denying the benefit of the DFCE Scheme exemption under Notification 53/2003 : dated 01.04.2003 in respect of the subject Bills of Entry. 13. That brings us to the challenge of the petitioner to the Circular dated 30.01.2001 (Annexure-'L') on the touchstone of Articles 14 and 19(1)(g) of the Constitution of India. What is evident from reading the initial notification dated 01.04.2003, together with further amendments dated 24.01.2004, 05.04.2004 and 30.01.2004 is that, the policy initiative being a recent one and in the nascent stage, required certain classification as to whether even derivatives which had its origin from agricultural or dairy products would merit exemption under the DFCE Scheme. In context of and with a view to prevent subversion of tariff barrier specially created to safeguard the interests of domestic agriculture/dairy industry, it was clarified that it would also mean all types of products derived from agriculture. The effect of such a clarification in no manner whittled down or restricted the scope of the exemption notification. In context of and with a view to prevent subversion of tariff barrier specially created to safeguard the interests of domestic agriculture/dairy industry, it was clarified that it would also mean all types of products derived from agriculture. The effect of such a clarification in no manner whittled down or restricted the scope of the exemption notification. In context of the petitioner's case, it is not so disputed by him that the root product, soyabean is an agricultural product. Evidently on it being reprocessed as Crude degummed Soyabean Oil, it does not become a distinct product. There is no chemical modification and it is not an edible oil as evidenced from the tests report. It, therefore, essentially retains the characteristic of an agricultural product. In this regard, it shall be worthwhile to reproduce the decision of the Apex Court in the case of Shyam Oil Cake Ltd. (supra) which reads as under: "16. Thus, the amended definition enlarges the scope of manufacture by roping in processes which may or may not strictly amount to manufacture provided those processes are specified in the Section or Chapter notes of the Tariff Schedule as amounting to manufacture. It is clear that the Legislature realised that it was not possible to put in an exhaustive list of various processes but that some methodology was required for declaring that a particular process amounted to manufacture. The language of the amended Section 2(f) indicates that what is required is not just specification of the goods but a specification of the process and a declaration that the same amounts to manufacture. Of course, the specification must be in relation to any goods." 13.1. Precisely to overcome such mechanisms and permutations at the hands of an assessee to subvert the tariff barriers that the DGFT sought a clarification from the Department of Revenue. On a conjoint reading of the Notification/Public Notice/Handbooks of Procedure and SION, it becomes evident that the nexus of the imported commodity vis-à-vis the export product is not established. In the case of Meridian Industries Ltd. (supra), the Apex Court held that exemption notification is to be given strict interpretation and that unless assessee makes out clear case in its favour, it is not entitled to claim its benefit and if there is doubt or two interpretations are possible, one which favours Department is to be resorted. In the case of Meridian Industries Ltd. (supra), the Apex Court held that exemption notification is to be given strict interpretation and that unless assessee makes out clear case in its favour, it is not entitled to claim its benefit and if there is doubt or two interpretations are possible, one which favours Department is to be resorted. The clarification in light of these facts can therefore not be declared to be invalid and violative of Articles 14 and 19(1)(g) of the Constitution of India. 14. The petition therefore fails and is accordingly dismissed. Rule is discharged. 15. After the pronouncement of the order, Mr. Modh, learned advocate for the petitioner makes a request to extend the interim relief which was in operation during the pendency of the petition to which Mr. Desai, learned advocate for the respondent has objected. However, considering the facts of the case, interim relief granted earlier is extended for a period of four weeks from today.