CESTAT Ahmedabad Upholds Classification of Petroleum Solvent as Freely Importable

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench has delivered a significant judgment in Customs Appeal No. 11476/2017, setting aside the confiscation and penalty orders imposed on Gastrade International. The core issue pertained to the correct classification of imported Petroleum Hydrocarbon Solvent (125/240) Grade MTO—whether it should be treated as a freely importable product or a restricted one requiring State Trading Enterprise (STE) import route.

Case Snapshot

Importer: Gastrade International, Gandhidham
Product: Petroleum Hydrocarbon Solvent (MTO grade)
Declared Classification: CTH 2710 19 90 (“Others” – freely importable)
Customs Reclassification: CTH 2710 12 90 (“Light oils and preparations” – restricted)
Penalty and Fine Imposed: ₹15 lakh (fine), ₹7.5 lakh (penalty) under Sections 111(d), 111(m), 112(a)(i)

Test Report & Dispute

The Customs Laboratory report indicated that:

90% of the solvent distilled at 195°C, and
95% distilled at 207°C

The adjudicating authority interpreted this as qualifying the goods under CTH 2710 12 90, i.e., light oils and preparations, which are restricted imports under India’s EXIM Policy.

Legal Arguments & Tribunal’s Findings

SC Ruling in Krishna Technochem Case (2022):
- The Supreme Court clarified that “distils at 210°C” means exactly at, not up to 210°C.
- Therefore, if 90% distils below 210°C, it does not qualify as “light oils”.
Supporting Precedents:
- The Tribunal relied on its own ruling in Kunjal Synergies Pvt. Ltd. v. C.C., Mundra, which followed Krishna Technochem and upheld classification under 2710 19 90 for similar test results.
Erroneous Interpretation by Department:
- The department’s assumption that 95% distillation must happen at exactly 210°C was rejected.
- Tribunal found that distillation below 210°C aligns with the declared classification by the importer.

Final Verdict

Appeal allowed in full.
Classification under CTH 2710 19 90 upheld.
All confiscation orders, fines, and penalties were set aside.

Legal Significance

This case reinforces:

The necessity of strict interpretation of tariff subheading notes.
The binding nature of Supreme Court precedent in customs classification.
Protection against arbitrary reclassification where test data supports the importer’s claim.

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Source: CESTAT Ahmedabad

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