A) ABSTRACT / HEADNOTE

Gastrade International v. Commissioner of Customs, Kandla concerns classification of imported cargo declared as Base Oil SN 50 but treated by revenue authorities as High Speed Diesel (HSD). The Adjudicating Authority (Commissioner of Customs) found the goods to be HSD, ordered confiscation and penalties; CESTAT reversed and treated the goods as Base Oil since full IS:1460:2005 testing was not performed; the High Court reversed CESTAT and sided with revenue on the basis of preponderance of probabilities.

The Supreme Court re-examined laboratory reports from three notified labs (Vadodara Central Excise & Customs Lab; Central Revenues Control Laboratory, New Delhi; IOCL Central Laboratory, Mumbai) and the testimony of the IOCL expert, Dr. Gobind Singh. The Court held that classification under Chapter 27 depends on whether the substance is “most akin” to a specified commodity under the Tariff Act and that the “most akin” test (Rule 4 of General Rules) requires a higher degree of certainty than mere preponderance of probability when penal/confiscatory consequences attend.

The Court found laboratory reports and expert evidence ambiguous and incomplete (many parameters untested; evasive answers on flash-point significance) and therefore inadequate to classify the goods as HSD. Applying the most akin test, the Court concluded benefit of doubt must go to appellants and set aside confiscation and penalties. Key legal themes: standards of proof (preponderance vs heightened certainty for technical classification with penal consequences), role and limits of expert opinion (Evidence Act, s.45), and the primacy of most akin rule for tariff classification.

Keywords: most akin test; High Speed Diesel; Base Oil; IS:1460:2005; expert opinion; flash point; standard of proof.

B) CASE DETAILS 

i) Judgement Cause Title: Gastrade International v. Commissioner of Customs, Kandla.
ii) Case Number: Civil Appeal No. 4475 of 2025 (with Nos. 4476 & 4477).
iii) Judgement Date: 28 March 2025.
iv) Court: Supreme Court of India.
v) Quorum: B.V. Nagarathna and Nongmeikapam Kotiswar Singh, JJ.
vi) Author: Judgment delivered by Nongmeikapam Kotiswar Singh, J.
vii) Citation: [2025] 3 S.C.R. 1350 : 2025 INSC 411.
viii) Legal Provisions Involved: Customs Act, 1962 (ss.111(d), 111(m), 112(a), 112(b), 114AA, 117); Customs Tariff Act, 1975 (First Schedule, Rule 4 General Rules); Petroleum Act, 1934 (s.2(c)); Evidence Act, 1872 (s.45).
ix) Judgments overruled by the Case (if any): none overruling precedent; clarifies application of most akin test vs preponderance in classification.
x) Related Law Subjects: Customs law; administrative law; evidence law; petroleum law; taxation.

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute arose after three private importers declared consignments as Base Oil SN 50 (CTH 27101960). The Directorate of Revenue Intelligence (DRI) flagged the consignment as potentially HSD (CTH 27101930), a restricted importable item (per EXIM policy importable generally only by State Trading Enterprises). Samples were sent to three laboratories.

Vadodara lab reported conformity with HSD for 8 parameters (concluded other than Base Oil). CRCL New Delhi reported conformity for multiple parameters (10–12 parameters across samples) and characterized samples as other than Base Oil. IOCL Mumbai reported testing capability for 14 out of 21/22 parameters under IS:1460:2005 and recorded results for those; several parameters were marked FNA (facility not available).

Revenue issued show-cause notices invoking confiscation and penalties under relevant Customs Act provisions. The Adjudicating Authority confirmed HSD classification and penalties. CESTAT reversed insisting full IS testing (all 21/22 parameters) must be shown; IOCL report incomplete; flash point values above 93°C raised doubt.

The High Court allowed revenue appeals, applying preponderance of probability to the three lab reports and expert testimony. Supreme Court granted SLPs to decide whether the High Court correctly used preponderance and whether evidence sufficed to show goods are most akin to HSD.

D) FACTS OF THE CASE

Three appellants imported cargo from UAE per vessel Al Heera and declared it Base Oil SN 50. DRI intelligence led to seizure. Ten samples (composite and tank-wise) were tested at (i) Central Excise & Customs Laboratory, Vadodara (report dated 11.05.2018: 8 parameters tested; flash point (PMCC) >66°C; density 0.8301 g/ml; kinematic viscosity 3.80 cSt; concluded characteristics of HSD in respect of parameters tested and other than base oil), (ii) CRCL New Delhi (03.07.2018: reported results across 10–12 parameters for ten samples; flash points ranging from 78°C to 115°C across samples; concluded each sample conforms to HSD as per tested parameters), and (iii) IOCL Mumbai (14.08.2018: tested 14 parameters; many tests FNA; flash-point tests performed reported Pensky-Martens/PMCC results, with some flash points well above 66°C and some above 93°C; remarks emphasised facility not available for several parameters).

Dr. Gobind Singh of IOCL gave evidence but repeatedly stated lack of facility for certain tests and declined to ascribe definitive significance to untested parameters; evasive on import of flash point where statutory notes distinguish oils with flash points ≥93°C (e.g., jute batching/textile oils). Revenue issued show-cause notices (24.04.2019) seeking confiscation and penalties under ss.111(d), 111(m), 112(a), 112(b), 114AA, 117. Adjudicating Authority confirmed HSD; CESTAT reversed; High Court reversed CESTAT; matter reached Supreme Court.

E) LEGAL ISSUES RAISED

i. Whether the imported goods are High Speed Diesel (HSD) or Base Oil SN 50 for tariff classification?
ii. Whether laboratory reports testing only a subset of IS:1460:2005 parameters suffice to classify goods as HSD?
iii. Whether the Department may discharge burden by preponderance of probability in classification where penal/confiscatory consequences follow?
iv. What is the role and weight of expert opinion (Evidence Act, s.45) where tests are incomplete and expert evidence ambiguous?
v. Whether the correct interpretative test is preponderance of probability or the “most akin” test under General Rules (Rule 4) for tariff classification?

F) PETITIONER/ APPELLANT’S ARGUMENTS

i. The appellants contended laboratory tests were incomplete: IOCL tested only 14/21 parameters (others FNA); Vadodara and CRCL also tested partial parameters; therefore the Department failed to prove conformity to IS:1460:2005 in entirety.
ii. Appellants argued CESTAT correctly held that classification as HSD requires meeting all parameters and that flash-point readings (some >93°C) point away from HSD toward other hydrocarbon oils (e.g., jute batching/textile oils).
iii. They urged that ambiguous expert testimony (Dr. Gobind Singh’s evasions) cannot substitute for conclusive testing and that benefit of doubt should follow appellants.

G) RESPONDENT’S ARGUMENTS

i. Revenue relied on cumulative weight of three independent laboratory reports showing conformity on multiple parameters indicative of HSD and thereby discharged onus by preponderance of probability.
ii. It contended appellants failed to indicate which untested parameters would negate HSD classification and therefore burden shifted once revenue established probable conformity.
iii. Department submitted expert evidence and inter-lab concordance justified classification and penalties.

H) RELATED LEGAL PROVISIONS 

i. Customs Act, 1962: ss.111(d), 111(m), 112(a), 112(b), 114AA, 117 (confiscation, penalties).
ii. Customs Tariff Act, 1975: First Schedule, Chapter 27 Supplementary Notes; Rule 4 General Rules (classification: goods “most akin” to heading).
iii. Petroleum Act, 1934: s.2(c) (definition of flash-point).
iv. Evidence Act, 1872: s.45 (opinion of experts and its weight).

I) JUDGEMENT

The Supreme Court stressed that tariff classification must apply the most akin test under Rule 4 of the General Rules: the goods must bear the closest resemblance to a specified commodity. While preponderance of probability is the usual civil standard (Evidence Act, s.3), classification with confiscatory/penal consequences demands a higher degree of certainty than mere probability. The Court scrutinised all three laboratory reports and the cross-examination of Dr. Gobind Singh.

It observed that (a) Vadodara report examined only 8 parameters and did not give categorical opinion that samples were HSD; (b) CRCL tested 12 parameters but on at least two parameters the sample did not fulfil IS:1460:2005; (c) IOCL tested 14 parameters but several parameters were FNA and the expert repeatedly declined to opine on the significance of untested parameters.

Flash-point anomalies (some values above 93°C) raised material doubt especially because Supplementary Notes treat oils with flash points ≥93°C differently (e.g., jute batching/textile oils). The Court emphasised that expert evidence under s.45 is only an aid not binding and may be rejected where ambiguous or inadequate. Given that revenue had access to comprehensive laboratory infrastructure but did not obtain complete testing across all requisite parameters, it was unreasonable to shift burden to appellants to disprove conformity on untested parameters.

Consequently, the Court held the departmental case was inconclusive; preponderance of probability based on incomplete and evasive evidence did not satisfy the most akin requirement for tariff classification. Benefit of doubt was therefore given to appellants; confiscation and penalties set aside.

a. RATIO DECIDENDI

The operative ratio is twofold:

(1) classification under Customs Tariff must identify which specified good the imported article is most akin to the most akin test under General Rules is the controlling standard;

(2) where classification carries confiscatory/penal consequences and the determination depends on technical parameters, the Department must produce clear, reliable scientific evidence (complete testing or conclusive expert opinion).

Preponderance of probability is insufficient when lab reports are incomplete or the expert’s testimony is ambiguous, particularly where statutory notes (e.g., flash point distinctions) are engaged. Thus inconclusive tests do not satisfy the most akin threshold; benefit of doubt goes to importer.

b. OBITER DICTA

The Court observed (obiter) on the proper role of experts: while courts are not technical specialists and ordinarily accept scientific reports, ambiguous, evasive or incomplete expert evidence invites judicial scrutiny and cannot be the exclusive basis for adverse penal action.

The Court underscored the significance of flash point under Petroleum Act, s.2(c) and Chapter 27 notes though flash point may not be the sole determinant, it remains a material parameter. The decision comments on allocation of investigative responsibility: the Department, with superior resources, should ensure exhaustive testing before seeking confiscation.

c. GUIDELINES

i. For tariff classification involving technical specifications, revenue must seek complete testing aligned with the relevant BIS standard (IS:1460:2005), or obtain an authoritative expert opinion stating which class the sample is most akin to.
ii. Where laboratories mark FNA or test only subset parameters, report should state consequence of untested parameters and identify whether untested parameters could alter classification.
iii. Courts should apply most akin test (Rule 4) rather than mere preponderance when confiscation/penalties are at stake.
iv. Ambiguous expert testimony must be treated cautiously; corroboration by complete tests or multiple competent labs is preferable.
v. If revenue cannot produce conclusive evidence, benefit of doubt must be given to importer and confiscation/penalty withheld.

I) CONCLUSION & COMMENTS

The judgment re-balances evidentiary expectations in customs classification. It affirms that, although civil disputes commonly follow the preponderance standard, classification involving technical parameters and penal consequences requires the revenue to demonstrate a higher measure of certainty essentially that the imported good is most akin to the claimed tariff heading.

The Court’s insistence on conclusive technical proof or authoritative expert findings is protective of importers’ property and liberty interests where confiscation and penalties are sought. Practically, revenue authorities should ensure testing laboratories can examine all material IS parameters or commission referee tests; laboratory reports should avoid FNA without qualifying impact. For counsel, the judgment crystallises defensive strategies: attack incompleteness of tests; elicit evasive expert answers; highlight statutory notes (e.g., flash-point thresholds) that point away from contested classification.

The decision also clarifies that expert opinion under s.45 Evidence Act is persuasive not binding; courts must critically appraise scientific evidence, its completeness and the expert’s ability to opine on contested technical parameters. The judgment thus advances procedural fairness in customs adjudication while preserving the Tariff Act’s interpretative strictness through the most akin rubric.

J) REFERENCES

a. Important Cases Referred
i. Collector of Customs, Madras & Ors. v. D. Bhoormall, AIR 1974 SC 859.
ii. A. N. Guha & Co. v. Collector, [1996 (86) ELT 333].
iii. State of H.P. v. Jai Lal, [1999] Supp. 2 SCR 318 : (1999) 7 SCC 280.
iv. Dayal Singh v. State of Uttaranchal, [2012] 10 SCR 157 : (2012) 8 SCC 263.
v. M. Siddiq (Ram Janmabhumi Temple-5 J) v. Suresh Das, [2019] 18 SCR 1 : (2020) 1 SCC 1.

b. Important Statutes Referred
i. Customs Act, 1962, ss.111(d), 111(m), 112(a), 112(b), 114AA, 117.
ii. Customs Tariff Act, 1975, First Schedule, Chapter 27 Supplementary Notes; Rule 4 (General Rules).
iii. Petroleum Act, 1934, s.2(c).
iv. Evidence Act, 1872, s.45.