Supreme Court- Partial testing is insufficient for classification

In a significant judgment dated 28th March 2025, the Supreme Court of India ruled in favor of Gastrade International and others in a high-stakes customs classification dispute. The apex court overruled the Gujarat High Court’s earlier decision and held that the imported product should be classified as Base Oil, not High-Speed Diesel (HSD). This decision has wide-reaching implications for importers and customs authorities.

Background of the Case:

Importers: Gastrade International, Rajkamal Industrial Pvt. Ltd., and Divinity Impex.
Imported Base Oil SN 50 via Kandla Port.
Directorate of Revenue Intelligence (DRI) alleged the goods were High-Speed Diesel (HSD)—a restricted item under Indian law.

Action by Customs Authorities:

Samples tested by three labs including Indian Oil Corporation (IOCL).
Findings suggested the goods matched 14 out of 21 parameters under IS 1460:2005 (HSD standard).
Customs reclassified the goods as HSD and confiscated the consignment, levying heavy penalties for misdeclaration.

CESTAT Ruling (in favor of Importers):

Held that the goods did not meet all 21 parameters of IS 1460:2005.
Emphasized the burden of proof lies on the Customs Department to conclusively classify goods as HSD.
Directed in favor of the importers.

Gujarat High Court Ruling (against Importers):

Reversed CESTAT’s decision.
Ruled that partial conformity to HSD standards (14/21 parameters) was sufficient under the preponderance of probability.
Allowed reclassification and upheld penalties.

Supreme Court Verdict:

Rejected the Gujarat High Court’s reasoning.
Held that:
- All parameters of IS 1460:2005 must be satisfied to classify a product as HSD.
- Partial testing is insufficient for legal classification.
- The Customs Tariff Act and Interpretative Rules must guide classification—not assumptions or probability.
Reiterated that in case of classification doubt, benefit goes to the importer.

Legal Significance:

Reinforces need for complete and conclusive testing in customs classification.
Prevents arbitrary or assumption-based enforcement by Customs.
Sets a clear precedent for future disputes involving technical tariff classifications.

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Source: Supreme Court of India

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