2025 (11) TMI 615 - AT - Customs

Appeal remanded for fresh adjudication with expert assistance to determine classification of imported petroleum hydrocarbon solvent and penalties

C.C. – Mundra, Gujarat Versus Gastrade International

CESTAT AHMEDABAD - AT allowed the appeal by way of remand, holding that the matter must be reconsidered by the Commissioner (Appeals) with expert ... Classification of imported Petroleum Hydrocarbon Solvent Grade (125/240) - to be classified under CTH 27101990 or under CTH 27101910 - restricted goods or not - appellant is neither an STE nor have submitted any authorization as provided in the Policy condition no.2 of Chapter 27 of ITC(HS), Schedule 1 - suppression and mis-declaration of goods - levy of penalty u/s 112(a) of the Customs Act, 1962 - confiscation of the seized goods - HELD THAT:- The benefit of the earlier decision of Gastrade International vs Commissioner of Customs-Kandla [2025 (4) TMI 23 - SUPREME COURT] was not available to the Learned Appellate Authority while deciding this matter. It is found that the extensive guidelines have been laid down by the Hon’ble Supreme Court while dealing with the matter and how the test samples and reports are to be considered vis a vis the Section Notes, Chapter Notes and their statutory provisions. It is clear that Hon’ble Apex Court in the aforesaid decision while dealing with the situation when samples were not available for further testing as is also the position in this case, has decided to lay down the guideline for the test of those parameters which authorities consider are of essential character to satisfy the “Most Akin” test even when all parameters were not available. The same needs to be understood with the help of expert opinion. The Hon’ble Supreme Court has also stated that the expression ‘most akin’ is different from the expression ‘preponderance of probability’. Therefore in the instant cases, where some doubt may persist as to whether the parameters which could not be tested were or were not relevant for testing ‘most akinness’ to the alleged product, the department will need to look into the same with the assistance of an expert opinion. The matter is therefore remitted back to the Commissioner (Appeals) to decide the matters afresh, with the help of expert opinion as to whether the parameters tested would still establish ‘most akinness’ as per the above guidelines of the Apex Court or not - appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported product is classifiable under the declared tariff heading or under a restricted heading, having regard to laboratory test reports that do not record results for all parameters specified in the relevant BIS specification. 2. Whether, in presence of inconclusive or incomplete laboratory test reports, the proper test for classification is 'preponderance of probability' or the 'most akin' test under the General Rules of Interpretation (Rule 4). 3. Where samples are not available for fresh testing, what evidentiary and procedural steps (including use of expert opinion and opportunity for cross-examination) are required before sustaining confiscation and penalty under the Customs Act. 4. Whether the burden of proof for classification lies on the Revenue or the importer where statutory specifications contain multiple parameters and some parameters were not tested. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification when laboratory reports omit tests for specified BIS parameters Legal framework: Classification must conform to tariff headings and applicable Section/Chapter Notes; when classification depends on conformity with a BIS specification (supplementary note), the parameters in that specification are material for classification. Precedent Treatment: The Tribunal followed the approach of the apex authority which held that classification requires satisfaction of the parameters or a clear finding of 'most akinness' where not all parameters are tested. Interpretation and reasoning: The Court observed that the test reports here did not include results for three material parameters (burning quality: char value and bloom on glass chimney; colour (Saybolt); total sulphur percent). Absence of tests on those parameters creates real ambiguity whether the product meets the specification required for classification as the restricted product. The Court reiterated that conformity only with some parameters is insufficient where the rule-making authority has delineated specific parameters for identification. Ratio vs. Obiter: Ratio - where statutory/standards specifications are prescribed for classification, incomplete testing on those identified parameters precludes a safe classification into the restricted heading without further scientific evidence. Conclusion: The impugned classification cannot be sustained based on incomplete laboratory test reports; further scientific analysis or expert assistance is necessary to determine whether the product is of the restricted description. Issue 2 - 'Most akin' test versus 'preponderance of probability' for tariff classification Legal framework: Rule 4 of the General Rules for Interpretation requires assessing whether the imported goods are 'most akin' to a specified description among competing headings; this is the appropriate test where goods bear resemblance to more than one specified product. Precedent Treatment: The Court followed apex guidance that the 'most akin' test, not mere preponderance of probability, governs classification disputes when statutory notes and specifications are relevant. Interpretation and reasoning: The Court explained that preponderance of probability may be insufficient to decide between competing headings where attributes may overlap; 'most akin' demands a closer resemblance to one specified good than to others. Inconclusive or partial test results do not establish the requisite high degree of affinity to the restricted product under the 'most akin' test. Ratio vs. Obiter: Ratio - the 'most akin' test is the correct and more exacting legal standard for classification in such contexts; preponderance of probability is an inadequate substitute. Conclusion: The decisionmaker must apply the 'most akin' test and obtain appropriate scientific evidence/opinion to conclude that the imported goods are most akin to the restricted description before sustaining classification against the importer. Issue 3 - Evidentiary consequences of inconclusive tests and unavailability of samples for retesting; role of expert opinion and procedural safeguards Legal framework: Confiscatory proceedings under the Customs Act must be founded on conclusive evidence; where samples/tests are inconclusive or samples are unavailable for retest, the authority must either obtain expert opinion demonstrating 'most akinness' or, if appropriate, give the importer benefit of doubt. Precedent Treatment: Reliance was placed on prior apex guidance which (a) criticized incomplete laboratory testing, (b) recognized the practical difficulties of retesting after long delay, and (c) directed that where tests are inconclusive and retest is impractical, the benefit of doubt may be given to the importer as a one-time measure; but also that authorities should obtain expert opinion where feasible and allow procedural fairness including cross-examination. Interpretation and reasoning: The Court noted that samples were not available for retesting here, making further laboratory analysis impractical. Nonetheless, where doubt persists as to whether the parameters tested suffice to establish 'most akinness', the department must obtain expert assistance to assess which parameters are of essential character for the 'most akin' determination and whether existing tests establish such akinness. The importer/respondent must be afforded the opportunity to cross-examine the expert or adduce contrary material. Ratio vs. Obiter: Ratio - where tests are incomplete and samples unavailable, the decisionmaking authority must obtain expert opinion to identify essential parameters for the 'most akin' test and must provide procedural rights (opportunity to cross-examine), failing which confiscation/penalty cannot be sustained on inconclusive evidence. Obiter - ancillary observations about systemic need to enhance laboratory facilities (while persuasive and directive, they serve as policy guidance rather than narrow dispositive ratio in the specific appeals). Conclusion: In the present matters, because samples cannot be retested and reports are inconclusive on essential parameters, the correct course is to obtain expert opinion on 'most akinness', afford the party opportunity to cross-examine the expert or produce contrary literature, and then decide afresh; absent such steps, the impugned confiscation and penalty cannot be sustained. Issue 4 - Burden of proof in classification disputes when statutory parameters are prescribed Legal framework: Principles allocating burden of proof in customs classification; when authorities prescribe specific parameters, proof of conformity to those parameters is central to classification. Precedent Treatment: The Court reiterated prior authority placing the burden of classification on the Revenue to show that imported goods satisfy the statutory parameters or are most akin to a specified restricted good. Interpretation and reasoning: The Tribunal emphasized that where the authority has set out precise parameters for identification, the Revenue must secure evidence (laboratory tests and expert opinion) demonstrating that the imported goods meet those parameters or otherwise are most akin. It is not reasonable to shift to the importer the onus to disprove compliance with untaken tests, particularly when the Revenue had access to testing resources but did not obtain complete tests. Ratio vs. Obiter: Ratio - burden lies on Revenue to prove conformity with the parameters or most-akin relationship; it is unreasonable to require the importer to establish non-conformity where tests are incomplete and samples not retestable. Conclusion: The Revenue must produce conclusive scientific evidence or expert opinion to discharge its burden; failure to do so requires remand for further expert assistance and procedural opportunity rather than upholding confiscation/penalty. Remedial and procedural outcome (Court's conclusion) The Court remitted the matters to the appellate authority to decide afresh with directions to obtain appropriate expert opinion regarding whether the tested parameters suffice to establish 'most akinness' to the restricted product, to permit cross-examination of the expert or adducing of contrary material, and then to re-evaluate classification, confiscation and penalty. The appeals are allowed by way of remand.