19 May 2025 Legal Updates

WHEN DOES 'MANUFACTURE' TAKE PLACE? SUPREME COURT EXPLAINS ESSENTIAL TESTS

(a) Case Title:

• Noble Resources and Trading India Private Limited vs. Union of India & Ors.

(b) Court:

• Supreme Court of India

(c) Date of Decision:

• May 14, 2025

(d) Bench:

• Justice Abhay S. Oka and Justice Ujjal Bhuyan

Case Background:

The appellant company, Noble Resources and Trading India (formerly Andagro Services Pvt. Ltd.), was a government-recognized "two-star export house" engaged in exporting rice, sesame seeds, and soyabean meal extracts. The company imported crude degummed soyabean oil claiming duty exemption under the Duty- Free Credit Entitlement (DFCE) certificate granted under the Export-Import (EXIM) Policy 2002-2007. The customs authorities denied the exemption, claiming that the import was of an "agricultural product," which was specifically excluded from the exemption notification.

Key Issues:

• Whether an administrative circular can expand the scope of exclusion provided in a statutory notification
• Whether crude degummed soyabean oil constitutes an "agricultural product"
• Whether the process of extracting oil from soyabean constitutes "manufacture"

Court's Analysis:

1. On Administrative Circulars vs. Statutory Notifications:

• The statutory notification excluded "agricultural and dairy products" from duty exemption benefits. The subsequent administrative circular expanded this exclusion to include "all types of products derived from agriculture/dairy origin". The Court held that an administrative circular cannot expand, restrict, or whittle down the scope of a statutory notification

2. On What Constitutes "Manufacture":

• The Court examined whether the process of converting soyabean into crude degummed soyabean oil constitutes "manufacture".
• It applied the test from Union of India vs. Delhi Cloth and General Mills (1963) and other cases that manufacture implies transformation resulting in a new and distinct article with a distinctive name, character, or use
• The Court found that the multi-step process (cleaning, cooking, flaking, extraction, etc.) transformed soyabean into a completely different product.

3. On the Definition of "Agricultural Product":

• Since "agricultural product" was not defined in the EXIM policy, the Court applied dictionary meanings and common parlance tests
• Agriculture is defined as "the science or art of cultivating soil, harvesting crops and raising livestock"
• An agricultural product is "the direct result of husbandry and the cultivation of soil" in its "natural unmanufactured condition"

Court's Conclusions:

The circular expanding the exclusionary clause in the notification had no legal consequence

• Crude degummed soyabean oil is distinct in character and identity from soyabean
• The process carried out by the appellant is "manufacturing"
• Crude degummed soyabean oil is not an agricultural product
• The appellant is entitled to the benefits under the notification
• The Court allowed the appeal, setting aside both the High Court judgment and the Assistant Commissioner's order.

APPELLATE COURT CANNOT DIRECT ENHANCEMENT OF SENTENCE IN CONVICT'S APPEAL: SUPREME COURT

(a) Case Title:

• Sachin v. State of Maharashtra 

(b) Court:

• Supreme Court of India 

(c) Date of Decision:

• 21 April 2025 

(d) Bench:

• Justice B.V. Nagarathna and Justice Satish Chandra Sharma 

Facts:

The appellant, Sachin, was convicted under Sections 3(a) and 4 of the POCSO Act and Section 376 IPC for sexually assaulting a 4-year-old girl.  The Special Court sentenced him to 7 years of rigorous imprisonment (the minimum under POCSO at the time). 

Sachin appealed to the Bombay High Court challenging his conviction.  The High Court, instead of reducing the sentence, enhanced it by applying Section 5(m) and 6 of POCSO (aggravated penetrative sexual assault) and Section 376(2)(i) IPC, remanding the case to the Special Court for reconsideration of sentence.  The Special Court then imposed life imprisonment (minimum 10 years under POCSO). 

Sachin had already served 11 years and 8 months (beyond the original 7-year sentence) when the matter reached the Supreme Court. 

Legal Issues:

• Can an appellate court enhance the sentence in an appeal filed by the accused? 
• Does the High Court have the power to suo motu enhance punishment in a convict’s appeal? 
• Whether the principles of natural justice were violated in this case? 

SUPREME COURT’S ANALYSIS: 

1. No Enhancement in Accused’s Appeal: 

• Under Section 386(b)(iii) CrPC, an appellate court cannot enhance the sentence in an appeal filed by the accused. 
• The High Court erred in remanding the case for enhancement when Sachin had only sought acquittal/reduction of sentence. 

2. Revisional Jurisdiction Not Applicable: 

• The High Court cannot use revisional powers (Section 401 CrPC) to enhance punishment in an accused’s appeal unless the State/complainant files for enhancement. 
• The principle of "no reformatio in peius" (no worsening of the appellant’s position) was violated. 

3. Voilations of Natural Justice:

• Sachin was not given a proper opportunity to argue against enhancement before the High Court. 

Final Decision:

The Supreme Court restored the original 7-year sentence but noted Sachin had already served 11+ years.  Exercising Article 142 (complete justice), the Court ordered his immediate release. 

Key Legal Principles:

Section 386 CrPC: Appellate courts can modify sentences but cannot enhance punishment in an accused’s appeal.