Legal principle

Imported goods can be classified as a prohibited specified good such as HSD only where scientific evidence establishes that they are 'most akin' — bear the closest resemblance — to that good, and where the test reports are inconclusive and fall short of the prescribed specifications, the benefit of doubt must go to the importer.

Court decision

The Supreme Court allowed the appeals of the importers and set aside the Gujarat High Court's common judgment dated 20.01.2022, holding that the goods could not be classified as HSD on the inconclusive evidence. The correct classification test is whether goods are 'most akin' (closest resemblance) to the specified good under Rule 4, not mere preponderance of probability; as the oil did not fully satisfy IS 1460:2005, the test reports were incomplete and the expert gave no definitive opinion, the benefit of doubt was given to the appellants, the impugned orders were quashed, and the respondents were directed within six months to ensure laboratory facilities for testing all (or all essential) parameters.

Facts

Three importers — M/s Gastrade International, M/s Rajkamal Industrial Pvt Ltd and M/s Divinity Impex — imported a petroleum cargo from UAE by vessel 'Al Heera' docked at Kandla Port, declaring it as 'Base Oil SN 50' classifiable under Chapter Heading 27101960. On an intelligence report, the DRI seized the cargo classifying it as High Speed Diesel (HSD) under CTH 27101930, an item prohibited for import except by State Trading Enterprises under the EXIM policy. Samples were tested at three laboratories (Vadodara, CRCL New Delhi and IOCL Mumbai), the last reporting conformity with only 14 of the 21 prescribed parameters of IS 1460:2005. The DRI issued show cause notices, and the Adjudicating Authority (Principal Commissioner, Kandla) held the goods to be HSD, ordering confiscation under Sections 111(d) and (m) and penalties on the importers and their Directors under Sections 112(a), 112(b), 114AA and 117 of the Customs Act, 1962, while permitting redemption for re-export on payment of fine. CESTAT reversed, holding the goods were Base Oil and not HSD, but the Gujarat High Court restored the adjudication order.

Key provisions

• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 2, Customs Tariff Act, 1975 — Duties specified in the Schedules to be levied