Incomplete Laboratory Test Reports Cannot Be Basis for Reclassifying Imported Goods as Kerosene: CESTAT [Read Order]

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that incomplete laboratory test reports cannot be used for reclassifying imported goods as Superior Kerosene Oil.

Danish Impex imported goods from UAE and declared them as “Industrial Composite Solvent” under Customs Tariff Item 3814 0010. The goods were cleared under the Risk Management System, but later examined by the Central Intelligence Unit at JNCH.

The department sent samples for testing. The laboratory reports stated that the goods met specifications of kerosene or Superior Kerosene Oil. Based on this, the department alleged that the importer had misdeclared Superior Kerosene Oil as industrial composite solvent, since import of SKO was restricted to State Trading Enterprises.

The adjudicating authority rejected the declared classification, reclassified the goods as SKO under CTI 2710 1910, ordered confiscation and imposed penalties. The Commissioner (Appeals) upheld the classification and also enhanced redemption fine.

The appellant’s counsel argued that the laboratory reports were incomplete because all mandatory BIS parameters under IS 1459:1974 were not tested. The counsel argued that only five or six out of eight parameters were tested and important tests such as burning quality and total sulphur content were not conducted.

The revenue counsel argued that most parameters were tested and the goods were rightly treated as kerosene. The department also argued that hydrocarbon solvents are classifiable under heading 2710.

The two-member bench comprising S.K. Mohanty, Member (Judicial), and M.M. Parthiban, Member (Technical), observed that SKO classification requires conformity with BIS specification IS 1459:1974. The tribunal observed that all eight parameters must be tested before imported goods can be treated as Superior Kerosene Oil.

The tribunal pointed out that the laboratory reports did not test all required parameters. It explained that incomplete test reports cannot support reclassification, confiscation or penalty. The tribunal relied on earlier rulings including Jaymco Polymers and the Supreme Court judgment in Gastrade International, where inconclusive test reports were held insufficient for adverse classification.

The tribunal set aside the reclassification, demand, confiscation, redemption fine and penalties against Danish Impex.

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