Imported bulk liquid cargo seizure quashed; ambiguous cloud point standards and inconclusive tests cannot prove misclassification or prohibition

HC held that the imported bulk liquid cargo could not be seized solely on the basis of the cloud point parameter, given ambiguity in expert opinions, overlapping specifications between Distillate Marine Fuel and other distillate oils, and absence of a definite, uniform standard. Relying on the SC's principle that, in case of inconclusive laboratory results, the Department cannot succeed even on a preponderance of probability, HC found discriminatory treatment vis-à-vis similarly situated importers whose cargo with comparable cloud point values had been released. Concluding that the Department failed to establish that the goods were misclassified or prohibited, HC quashed the seizure memo and ordered release of the petitioners' cargo.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the seizure of the imported bulk liquid cargo declared as "Distillate Fuel Oil SRFO / Distillate Oil" under Section 110 of the Customs Act, 1962, based on the CRCL (Delhi) Test Report dated 30.09.2025 and Seizure Memo dated 01.10.2025, was legally justified.

1.2 Whether, on the basis of the competing laboratory test reports (CRCL Vadodara and CRCL Delhi) and the parameters under IS 16731:2019 and IS 1460:2025, the imported goods could be treated as "Distillate Oil / Distillate Marine Fuel" or as "Automotive Diesel Fuel / HFHSD", and whether there was mis-declaration.

1.3 Whether the petitioner was entitled to release (or provisional release) of the seized cargo, including on the basis of Public Notices governing testing and release at ports and alleged parity with other traders whose similar goods were released by customs authorities at Kandla, and the applicability of the Supreme Court decision in Gastrade International.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of seizure under Section 110 of the Customs Act, 1962

Interpretation and reasoning

2.1 The Court records that the petitioner imported bulk liquid cargo declared as Distillate Fuel Oil SRFO under specified Bills of Entry and that samples were initially drawn by Customs and sent to CRCL, Vadodara, which, vide Test Report dated 27.08.2025, opined that the samples met the requirements of Distillate Marine Fuel as per IS 16731:2019.

2.2 The Court notes that after the cargo was transferred to customs-bonded tanks, DRI officers drew fresh representative samples in triplicate on 01.09.2025 and detained the cargo under Section 110 of the Customs Act, 1962 based on information of possible mis-declaration.

2.3 The Court further notes that the petitioner complained that the cargo was not released and that test results of samples drawn on 01.09.2025 were not furnished, despite completion of discharge and sample drawal and despite Public Notices prescribing testing and release procedures. Subsequently, the CRCL (Delhi) Test Report dated 30.09.2025 was issued, stating that the imported goods do not meet the requirements of Distillate Oil as per IS 16731:2019 and have characteristics of Automotive Diesel Fuel as per IS 1460:2025, leading to the Seizure Memo dated 01.10.2025.

2.4 The petitioners contend that seizure solely on the basis of the Delhi Test Report is unjustified because (i) an earlier consistent report in their favour exists from CRCL Vadodara; (ii) the Delhi report relies only on deviation in one parameter (Cloud Point) while all other key parameters are within the specified limits for Distillate Oil; and (iii) the report does not conclusively state that the goods are not Distillate Oil or are definitively Automotive Diesel Fuel.

2.5 The respondents argue that the Delhi Test Report constitutes a specific finding that the imported cargo does not conform to IS 16731:2019 for Distillate Oil and bears characteristics of Automotive Diesel Fuel, thereby justifying the inference of mis-declaration and seizure under Section 110.

Conclusions

2.6 From the available portion of the judgment, the Court identifies and sets out the rival contentions and the factual basis of the seizure, including the reliance on the Delhi Test Report and the earlier Vadodara Test Report. However, the extracted text does not contain the Court's final determination on whether the seizure under Section 110 was valid or liable to be quashed.

Issue 2: Classification of the imported product and allegation of mis-declaration

Legal framework

2.7 The Court records that the Delhi Test Report evaluated the sample against IS 16731:2019 (Distillate Marine Fuel) and made reference to its characteristics vis-à-vis IS 1460:2025 (Automotive Diesel Fuel). Fourteen parameters/characteristics were tested, including "Cloud Point" and density at 15°C.

2.8 The respondents refer to Policy Condition No. 5, Chapter 27 of Schedule-I of the Import Policy - ITC (HS) 2022, under which diesel / High Flash High Speed Diesel (HFHSD) is a restricted item for import, in contrast to Distillate Marine Fuel/Distillate Oil.

Interpretation and reasoning

2.9 The petitioners emphasize that, as per the Delhi Test Report itself, out of 14 characteristics, all parameters are satisfied except Cloud Point (Sr. No. 14), which is recorded as -4.6°C, and that on this solitary parameter the opinion has been formed that the product does not meet IS 16731:2019 and has characteristics of Automotive Diesel Fuel. They contend that the report does not conclusively classify the product as diesel and that multiple parameters, including density, kinematic viscosity, distillation (IBP and recovery), Cloud Point, and flash point, are within acceptable ranges for Distillate Oil, consistent with other traders' consignments treated as Distillate Marine Fuel.

2.10 The petitioners rely on the Supreme Court decision in Gastrade International, arguing that where the overwhelming majority of test parameters align with the declared product, minor deviations or overlapping characteristics do not justify re-classification as diesel and consequent penal consequences.

2.11 The respondents counter that the Delhi Test Report unequivocally notes that the "sample has the characteristics of Automotive Diesel fuel" and also that the goods do not meet IS 16731:2019 for Distillate Oil. They particularly stress that density at 15°C-a parameter expected to be higher for Distillate Marine Fuel and lower for diesel-is consistent with diesel, and combined with the failed Cloud Point parameter, establishes that the imported goods are diesel/HFHSD and hence mis-declared.

2.12 The respondents add that end-use verification has shown that similarly described "Distillate Oil" has been supplied to goods transport agencies and construction companies and used as diesel in trucks, excavators, and as light diesel oil, reinforcing the belief that the goods are in fact diesel, restricted under the import policy.

Conclusions

2.13 The Court recognises the existence of two conflicting laboratory reports (Vadodara and Delhi) and sets out in detail the competing arguments on the relevance of individual parameters, especially Cloud Point and density, to the classification as Distillate Oil versus Automotive Diesel Fuel, and the allegation of mis-declaration. The provided extract, however, does not disclose the Court's ultimate finding on classification or on whether mis-declaration was established.

Issue 3: Entitlement to release / provisional release; parity and applicability of Gastrade International

Interpretation and reasoning

2.14 The petitioners argue that, in view of the favourable CRCL Vadodara report, the predominance of parameters supporting Distillate Oil in the Delhi report, and Public Notices governing port procedures, the customs authorities were obliged to release the cargo, or at least consider provisional release. They further claim parity with other traders whose goods, allegedly of identical or similar description and quality, were provisionally released by customs authorities at Kandla, with reliance placed on the Supreme Court's ruling in Gastrade International.

2.15 The respondents submit that the petitioner cannot claim parity with consignments released at Kandla because the goods in those cases are materially different from the petitioner's consignment. They also maintain that the authorities at Kandla may have treated other consignments based on their own factual matrix and test results, and that the Supreme Court decision in Gastrade International is distinguishable and inapplicable given the specific findings of the Delhi Test Report and the failure to meet certain parameters.

2.16 The respondents further contend that unauthorized import of diesel disguised as Distillate Marine Fuel results in loss of government revenue (owing to the higher tax structure applicable to diesel) and allows unlawful claims of input tax credit that would not be available if the supplies were treated as diesel outside the GST regime, thereby justifying a stricter approach and refusal of release.

Conclusions

2.17 The Court notes the petitioner's reliance on parity and on the Supreme Court's decision in Gastrade International, and records the respondents' contention that the said decision and prior releases at Kandla are not applicable to the petitioner's case. The segment of the judgment provided does not set out the Court's final decision on entitlement to release or provisional release, or on the applicability of Gastrade International to the facts at hand.

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