CESTAT Overturns Diesel Seizure, Rules Lab Test Trumps "Confession" in Classification Dispute [Read Order]
The CRCL test report explicitly stated that the sample was a "mixture of mineral hydrocarbon oil mainly containing diesel fraction" but crucially added that it "does not meet the requirements of IS standards... Automotive Diesel fuel (IS:1460)."
Diesel - seizure - taxscan
Diesel - seizure - taxscan
The Mumbai Bench of The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the confiscation of a consignment of mixed hydrocarbon oil, holding that a laboratory test report conclusively proving the goods were not automotive diesel fuel cannot be overruled by a so-called confession.
Victory Trading Company, which had imported a consignment declared as ‘Mixed Hydrocarbon Oil’ and classified it under Customs Tariff Item (CTI) 27011990. Based on intelligence, the Nhava Sheva Preventive Unit suspected the goods were mis-declared automotive diesel oil which is a restricted item; and seized the consignment. Samples were sent to the Central Revenue Control Laboratory (CRCL) for testing.
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The CRCL test report explicitly stated that the sample was a "mixture of mineral hydrocarbon oil mainly containing diesel fraction" but crucially added that it "does not meet the requirements of IS standards... Automotive Diesel fuel (IS:1460)." Despite this clear scientific finding, the department re-classified the goods as ‘Automotive Diesel Fuel’ under a restricted tariff item. This re-classification was primarily based on statements recorded from the importer’s partner, who allegedly admitted the goods were 97% diesel, and on internet-sourced information about fuel blending.
The tribunal thoroughly examined the legal framework for classification, emphasizing that goods under Chapter 27 of the Customs Tariff must conform to specific Bureau of Indian Standards (BIS) to be classified under dedicated headings. The bench noted that the CRCL report was unequivocal: the goods failed to meet the 21 parameters required by IS 1460:2005 to be classified as Automotive Diesel Fuel.
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The tribunal strongly criticized the lower authorities for ignoring the definitive lab report in favor of statements and internet material. It reaffirmed the settled legal principle from the H.P.L. Chemicals Ltd. (2006) case that the burden of proof for re-classification lies squarely on the revenue department, which it failed to discharge. The bench further cited the Vinod Solanki (2009) case, noting that a statement made under investigative stress requires strong independent corroboration, which was absent here. The forensic analysis of seized electronic devices also yielded no incriminating evidence.
The final order was pronounced by a bench comprising S.K. Mohanty, Member (Judicial), and M.M. Parthiban, Member (Technical). The tribunal allowed the importer’s appeal, setting aside the confiscation order and affirming that the goods were correctly declared, thereby upholding the supremacy of scientific evidence in classification matters.
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