Legal principle

Where the department's test reports are inconclusive or bested by more specialized reports under the 'most akin' test, and the disputed goods are merely a species of the declared genus (NGL within Naphtha) covered by the Advance Authorisation, the burden of proof on the department is not discharged and the importer's classification cannot be disturbed.

Court decision

The Tribunal allowed the appeals, holding that the department had not authoritatively established its proposed classification and that the appellant's classification could not be disturbed; even assuming the goods were NGL, they fell within the genus Naphtha and the clearance under the Advance Authorisation with Notification 18/2015-CUS was neither incorrect nor illegal, so the demand arising from the OIO was liable to be set aside.

Facts

Hazel Mercantile Limited imported cargo declared as Naphtha in seven Bills of Lading shipped on vessel MT Tuna from Sohar, Oman, for clearance at Kandla under Bills of Entry for warehousing, against an Advance Authorisation for onward export to Verzone PTE Ltd. Customs officers drew samples which CRCL Kandla tested, opining the goods were Natural Gasoline Liquid (NGL), and DRI then issued Section 108 summons, searched the appellant's office, seized mobile phones of directors/employees and the CHA, and seized the goods stored at the FSWAI tank terminal, alleging mis-declaration/mis-classification of Naphtha instead of NGL. Statements of company officials, the terminal manager and the Customs Broker's partner were recorded under Section 108. By OIO dated 28.07.2025, the Commissioner of Customs, Kandla decided against the importer, and individual co-appellants (staff and associates) were subjected to penalty.

Key provisions

• Section 5, The Foreign Trade (Development and Regulation) Act, 1992 — Foreign Trade Policy.
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Rule 12, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Rejection of declared value
• Section 11, Customs Act, 1962 — Power to prohibit importation or exportation of goods
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 3, The Foreign Trade (Development and Regulation) Act, 1992 — Powers to make provisions relating to imports and exports.
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 138C(4), Customs Act, 1962 — Admissibility of micro films, facsimile copies of documents and computer print outs as documents and as evidence
• Section 57, Customs Act, 1962 — Licensing of public warehouses
• Section 8(a), Customs Act, 1962 — Power to approve landing places and specify limits of customs area