Manufactured Products Like Rice Bran Oil And De-Oiled Rice Bran Cannot Be Categorized As ‘Agricultural Produce’ Under The West Bengal Act Of 1972: Calcutta High Court

"The tipping point, or the determinative test, therefore is that the result of the process (amounting to 'manufacture') must be the emergence of a commercially recognizable new commodity, and not mere variation of an existing one." Calcutta High Court, in a significant ruling dated September 25, 2026, held that Rice Bran Oil and De-Oiled Rice Bran, being manufactured industrial products that lose the inherent characteristics of paddy, do not fall within the definition of ‘agricultural produce’ under the West Bengal Agricultural Produce Marketing (Regulation) Act, 1972.

A division bench of Justice Rajasekhar Mantha and Justice Ajay Kumar Gupta observed that the state executive's attempt to categorize these manufactured oils as agricultural produce via notifications was an act of excessive delegation and contrary to the legislative intent of the parent Act.

The appellant, Sethia Oil Industries Ltd., challenged executive notifications from 2002, 2008, and 2017 which sought to classify Rice Bran Oil and De-Oiled Rice Bran as ‘agricultural produce’ under the 1972 Act. These notifications mandated the appellant to obtain licenses and pay market fees for their manufacturing units in Burdwan. The appellant contended that these oils are outcomes of complex industrial solvent extraction processes and are not agricultural in nature, further arguing that the notifications were ultra vires the Constitution and the parent legislation.

The court was primarily tasked with determining whether Rice Bran Oil and De-Oiled Rice Bran constitute ‘agricultural produce’ under the 1972 Act. The bench also addressed whether the 2014 and 2017 amendments to the Act were unconstitutional for lack of prior Presidential assent and whether the Act’s definition of ‘sale’ conflicted with the Sale of Goods Act, 1930.

Court Clarifies Scope of Agricultural Produce

The court emphasized that the definition of agricultural produce under the 1972 Act, even after amendments, is limited to products derived from specified natural techniques like agriculture, horticulture, or pisciculture. The bench distinguished between simple processing—intended to make agricultural goods marketable—and industrial manufacturing, which results in a new commercial commodity.

Distinguishing Manufacture from Processing

Applying the ‘Inner Limit’ and ‘Outer Limit’ tests, the court noted that paddy, once processed into oil, loses its identity as a grain. The bench held that if a product is recognized by the market as distinct in name, character, and use from the raw agricultural material, it ceases to be an ‘agricultural produce.’

"The process by which Rice Bran Oil and De-Oiled Rice Bran are finally produced from paddy is, thus, not an agricultural activity but manufacturing and industrial. The said oils lose all the characteristics of paddy."

Validity of Amendments and Presidential Assent

The court rejected the argument that the 2014 and 2017 Amendment Acts required prior Presidential assent under Article 304 of the Constitution. It held that these amendments did not impede the free movement of goods; they merely regulated trade practices. Since the amendments fell under Entry 26 of the State List, the state legislature had the competence to enact them without federal intervention.

Definition of Sale and Fee Evasion

 Regarding the definition of ‘sale’ under the 1972 Act, the court upheld its validity, noting that it serves as a specific safeguard against fee evasion. The proviso to Section 2(na) was found to be a legislative device to ensure that entities do not avoid market fee liability by simply transferring goods between market areas, and this does not conflict with the Sale of Goods Act, 1930.

Role of Market Committees and Services

The court further observed that the distinction between a ‘tax’ and a ‘fee’ has been significantly diluted in modern jurisprudence. It held that market committees are regulators established to ensure transparent trade and dispute resolution, and their right to levy fees is not strictly contingent upon the provision of direct services to every individual trader at their doorstep.

The court allowed the appeals, quashing the executive notifications to the extent they included Rice Bran Oil and De-Oiled Rice Bran in the Schedule. The state was directed to refund all market fees collected from the appellant with 12% simple interest within 14 days. The court clarified that while the Act of 1972 is not in conflict with the Industries (Development and Regulation) Act, 1951, the state executive lacked the power to expand the definition of agricultural produce to include manufactured industrial oils.

Date of Decision: 25 September 2026