TaxTMI 
TaxTMI 
2026 (3) TMI 769
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.... IN R/SPECIAL CIVIL APPLICATION NOS. 1355 of 2026, 1356 of 2026, 1357 of 2026 & 1375 of 2026 : For the Petitioners: Mr Chirag Shetty, Mr Amit Laddha, With Mr Hardik P Modh, Advocates. IN R/SPECIAL CIVIL APPLICATION NOS. 1542 of 2026 : For the Petitioner: Mr S.N. Soparkar, Senior Advocate with Mr Anurag V Agrawal, And Mr Devendra Harnesha, Advocates. For the Respondent(S) No. 1: Mr Pradip D Bhate (1523). For the Respondent(S) No. 2,3: Mr N. Venkataraman, Addl. Solicitor General with Mr Utkarsh R Sharma(6157). COMMON ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA) 1. Since common question of law and facts arise, the matters are taken up for hearing and are being decided by this common judgment and order. 2. In all these writ petitions, the petitioners-importers, who have purchased / imported industrial oil, have challenged the action of the Directorate of Revenue Intelligence (for short, "DRI") seizing the goods by issuing seizure memos under Section 110 of the Customs Act, 1962. 3. The writ petition being Special Civil Application No.16799 of 2025 is taken up as the lead matter. 4. The fate of the respective writ petitions hinges on the ....
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....ts of any of these products as per the respective Indian Standards due to deviation from the prescribed limits with respect to one of the parameters, the sample can still be categorized as a diesel fraction based on carbon chain, distillation range and other parameters. It is submitted that the sample bears close similarity with one or more of the aforesaid IS specifications, which have overlapping parameters. Therefore, even if the product falls within the category of diesel fraction, the same would not have any adverse consequences, as all such products are diesel fractions. It is contended that the sample meets with the critical parameters of flash point and percentage distillation recovery. Hence, the seizure is uncalled for. 9. It is further contended that if the sample has close similarity with any one or more of the aforesaid Indian Standards, which have overlapping parameters and fall under the category of diesel fraction, the same would have no adverse consequences, as all such products are diesel fractions. In this regard reliance is placed on the communication dated 04.11.2025, issued by the Director, CRCL, and is submitted that this communication has been duly consid....
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.... there were minor deviations in two to three parameters, namely flash point, sulphur and marginal distillation recovery, and these deviations were deliberately brought about by adulterating the product with lighter hydrocarbons, which is apparent from the test results. It is further submitted that in view of the judgment of the Supreme Court in Gastrade International (supra), the samples were also sent to MRPL, so that all 21 parameters can be tested, and the test result showed that the product corresponded with the parameters of ADF as well as HFHSD. 15. It is asserted by the learned ASG that the importers have deliberately adulterated the fuel by adding sulphur in order to alter the flash point, which is a critical parameter. It is further submitted that due to adulteration with sulphur, lubricity in some cases, where sulphur levels are very high-also falls outside the prescribed range under IS 1460 for ADF. It is contended that the lowering of the flash point results from mixing or blending with lighter hydrocarbons, and such adulteration has been detected in both the Test Reports. In this regard, while referring to the statements of the importers recorded during the investig....
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.... Gastrade International (supra) and has prayed that the writ petitions may be dismissed with costs. 21. Finally, by placing reliance on the judgments of the Supreme Court in the case of Om Prakash Bhatia vs. Commissioner of Customs, 2003 (155) ELT 423 (SC), and in the case of Union of India vs. Rajgrow Impex LLP, 2021 (377) ELT 145 (SC), it is submitted that prohibited or restricted goods cannot be ordered to be released. It is therefore urged that this Court should not interfere with the action of the respondents in seizing the goods. In this regard, reliance is also placed on the judgment of the Supreme Court in Neeharika Infrastructure Pvt. Ltd. vs. State of Maharashtra & Ors., 2021 INSC 253. ANALSYIS AND CONCLUSION : 22. We have heard the learned advocates appearing for the respective parties and have perused the documents on record, more particularly the Test Reports, which were tendered by the respective parties during the course of hearing of the petitions. The said reports are not disputed by the petitioners, except to the extent that during the pendency of the petitions, the DRI has further undertaken tests of the samples drawn from the consignments, which were ha....
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....ging Point = Facility available at Refinery end only 14. Oxidation stability = To be done at refinery end only. 15. Lubricity wear scan at 60°C = Facility available at Refinery end only 16. Fame Content = Absent 17. PAH % by max = not determined as it is not a characteristic parameter. 18. Water = Less than 200 PPM. The sample has been tested for all the characteristics parameters tested above & which are stringent parameters also to characterize petroleum fuels. The sample meets all characteristic parameters of automotive diesel fuel except flash point (21.0°C), which is 14.0°C lower than required i.e. 35.0°C, the percentage distillation recovery at 360°C is 92% (3% lower than requirement of 95%) and Sulphur which is 1241 PPM, which is very high as comparison to required value of 10 PPM (BS-VI). The sample also meets the stringent parameter of HFHSD as mentioned in IS: 16861 except flash point (21.0°C), which is 45.0°C lower than the required, which was lowered by using lighter hydrocarbons. The GCMS chromatogram of sample reveals that the sample is mainly compo....
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....nation mg/Kg, max 24 - 11 Found meeting IS1460:2025 7 Parameter (xiv) total sulphur, mg/Kg. Max.10 Parameter (xii) Total sulphur % by mass Max 0.2% 0.20% Failed to meet IS1460:2025 requirement. However meeting the specification IS16861:2018. 8 Parameter (xvi) Cold Filter Plugging Point (CFPP)3, °C, Max: a) Winter +6 Cold filter plugging point (CFPP), °C, report -10 Found meeting both IS1460:2025 and IS16861:2018 specifications 9 Parameter (xvii) Oxidation stability g/m3 25 max (ASTM D2274) or 60 min (EN16091) Parameter (xv) Oxidation stability, g/m3-Max 25.0 (ASTM D2274) 28 (ASTM D2274) and >60min (EN16091) Failed to meet IS 16861:2018 requirement, however meets IS 1460:2025 specification through EN16091. 10 Parameter (xix) Polycyclic Aromatic Hydrocarbon (PAH) percent by mass, Max8.0 - 1.04 Found meeting IS1460:2025 11 Lubricity, wear scar diameter (wsd) at 60°C, µm, Max460 Lubricity, Corrected WSD at 60°C, microns max520 540 Failed to meetIS1460:2025 and IS 16861:2018 requirement. 27. A careful analysis of the Test Report of CRCL, Visakhapatnam, specifically indi....
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....ers, is not specifically defined in the Customs Tariff. It is a residual tariff entry and is freely importable as per the prevailing policy, with no defined IS specification. 35. According to the DRI, if the combined reading of both the Test Reports is considered, the actual product imported by the petitioners is Automotive Diesel Fuel (ADF) / HFHSD, which is a restricted commodity classifiable under CTH 2710 1944 and conforming to IS 1460. The Test Reports of CRCL, Visakhapatnam and MRPL record that the sample meets several stringent parameters of HFHSD. 36. The report of CRCL, Visakhapatnam specifically records that the sample is adulterated with lighter hydrocarbons and is most akin to HFHSD (IS 16861) / adulterated HFHSD. The MRPL report has also examined the sample with reference to both ADF and HFHSD and has tested 11 parameters. 37. The DRI has specifically contended that sulphur is added to make the imported petrochemical product fall outside the prescribed sulphur range under IS 1460 for ADF. It is further contended that lubricity naturally decreases when sulphur is reduced during the desulphurization process undertaken to make diesel compliant with emission stand....
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....h Speed Diesel / Automotive Diesel Fuel, the Supreme Court emphasized the application of the "most akin test". The Supreme Court also directed the competent authority to undertake testing of all 21 parameters in order to ascertain the true nature of the petroleum product. The relevant observations which weighed with the Supreme Court in the case of Gastrade International (supra), while setting aside the action of the respondents and order of the High Court are reproduced hereunder. "70. Specification regarding flash point is accordingly of some significance, even if it may not be the most important parameter in determining whether a petroleum product is HSD or not. From the specification provided under IS:1460:2005, HSD will have flash point of minimum 66 C. Thus, it will be treated as Petroleum Class C in terms of the Petroleum Act. It is not anyone's case that HSD is not a hydrocarbon and not an automotive fuel. If that is so, it will be classifiable under the Petroleum Act as a Class C Petroleum product, if not Class B or Class A product. As mentioned above, the range of the flash point of Petroleum Class C is between 65 C and 93 C whereas the test results show a higher....
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....oods/substance, compliance/conformity with the stated parameters would be the requirement. (iv) There are 21 parameters laid down under IS 1460:2005 and none of the tests have shown compliance with all these parameters. The last and third test have reported compliance with 14 parameters, though as discussed above in respect of 2 of the aforesaid 14 parameters, namely, flash point and distillation range, the same are not in conformity. Thus, it cannot be said there is substantial compliance with the parameters of IS 1460:2005. (v) Flash point, though may not be the most important parameter, yet, its importance in determining the nature of the Automotive oil cannot be ignored. Flash point being a very important criteria to classify petroleum products, non-compliance of the samples on this parameter would make the classification doubtful. (vi) Evasive answers and non-clarification on certain aspects of the flash point of the samples by the expert Dr. Gobind Singh certainly cast a serious doubt on the samples being identified as that of HSD. The expert himself also has not said that the samples are of HSD except for stating that the samples conform to certain....
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....he specified good. Certainly, the principle of preponderance of probability may fall short of the more heightened test of 'most akin' for proper classification. The imported goods may bear resemblance to more than one specified goods, in which event, unless the high degree in the test of preponderance of probability is applied, there may be difficulties in the proper classification. However, the said difficulty may be overcome if the test of 'most akin' is applied. If the attributes of the imported goods show that the goods are 'most akin' to the specified goods amongst an array of other specified goods, these imported goods have to be classified as the specified goods with which these goods bear the most resemblance or most akinness. Thus, in our view, application of the principle of preponderance of probability does not provide an accurate test. The more accurate and precise test will be whether the goods in question are 'most akin' or most similar to the specified goods, as provided under Rule 4 referred to above. 84. In the present case, as noticed above, the finding of the High Court is based primarily on applying the test of preponderance of probability which may not....
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....e between 95% to 98%). Thus, out of 21 parameters, the 18 parameters tested by CRCL, Visakhapatnam and MRPL, there is a clear opinion by the laboratory that the sample meets all characteristics of ADF and HFHSD, except the flash point, which is lowered by mixing lighter hydrocarbons. In this context, we may refer to the definition of 'adulteration' as supplied in the 'Malpractices Order,2005'. It reads thus: "2(a) "adulteration" means [presence of marker in motor spirit and high speed diesel and/or] [Inserted by Notification No. G.S.R. 18(E) dated 12.1.2007 (w.e.f. 21.12.2005).] the introduction of any foreign substance into motor spirit or high speed diesel illegally or unauthorisedly with the result that the product does not conform to the requirements of the Bureau of Indian Standards specifications number IS 2796 and IS 1460 for motor spirit and high speed diesel respectively or any other requirement notified by the Central Government from time to time;" Thus, any foreign substance, which is blended in high speed diesel illegally or unauthorizedly, which ultimate results into failure of requirements of BIS specifications IS 1460 is an adulteration. 48. In the ins....
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....porters before us by DRI, we have not expressed any opinion in this regard, since the investigation is still in progress. 51. We do not agree to the submissions advanced on behalf of the petitioners that the laboratory test results are liable to be discarded merely because the samples are tested in two different laboratories. The petitioners have not questioned the collection of the samples. Once the samples of the same commodity are duly collected, they can be tested in different laboratories, particularly when one laboratory may not be fully equipped to undertake testing of all 21 parameters. 52. We have also noticed that DRI has acted positively in releasing the seized goods by issuing NOC to 333 containers based on favourable reports. The petitioners have not alleged any mala fides against the officers of the DRI, who undertook the sampling and testing process. The petitioners have not challenged the test results. Hence, even if there are two or more Test Reports from different laboratories, so long as they conform to the directions of the Supreme Court in the case of Gastrade International (supra) and test the parameters prescribed under the relevant Indian Standards, su....