Commissioner of Customs, Kandla v. M/s Reliance Industries Limited

Background & Facts

The respondent-assessee (Reliance Industries Ltd.) filed a Bill of Entry classifying imported 'n-Hexane' (Exxsol Hexane) under Customs Tariff Heading 2901.10 and Central Excise Tariff Heading 2901.90 (Chapter 29). The Revenue issued a Show Cause Notice seeking classification under Chapter 27 (Heading 2710.00 for Customs and Heading 2710.12 for Central Excise) based on an SGS Chemical Test Report showing distillation range of 67.2°C and flash point below 25°C, claiming it was an admixture of hydrocarbons and motor spirit. The Adjudicating Authority (Assistant Commissioner) classified the product under Chapter 27. The Commissioner (Appeals) reversed this order, classifying it under Chapter 29. The Revenue appealed to CESTAT, which dismissed the appeal. The Revenue then appealed to the Supreme Court.

Statutes Involved

• Section 2, Customs Tariff Act, 1975 — Provides for duties of customs and classification of goods under the First Schedule
• Chapter 27, Customs Tariff Act, 1975 — Covers mineral fuels, mineral oils and products of their distillation; Heading 2710.00 covers petroleum oils and oils obtained from bituminous minerals
• Chapter 29, Customs Tariff Act, 1975 — Covers organic chemicals; Heading 2901.10 covers saturated acyclic hydrocarbons
• Chapter 27, Central Excise Tariff Act, 1985 — Corresponding provisions for excise classification; Heading 2710.12 covers special boiling point spirits with nominal boiling range 63-70°C
• Chapter 29, Central Excise Tariff Act, 1985 — Heading 2901.90 covers other acyclic hydrocarbons
• Harmonized System of Nomenclature (HSN) Explanatory Notes — Internationally accepted guide for tariff classification; specifically enumerates hexane under Heading 29.01
• Rule 3(a), General Rules for the Interpretation of the Import Tariff — Provides that the heading which provides the most specific description shall be preferred to headings providing a more general description
• Paragraph 2.3, Foreign Trade Policy (2002-2007) — Provides that any doubt regarding classification under ITC (HS) shall be referred to DGFT, whose decision shall be final and binding
• Policy Circular No. 40 (RE-2003)/2002-2007 dated 14.07.2004 — Issued by DGFT clarifying that import of Hexane is covered under Chapter 29 of ITC (HS) Classifications

Full Analysis

Cases Cited

• CCE v. Wood Craft Products Ltd. (1995) 3 SCC 454 — Held that HSN Explanatory Notes are a safe guide for resolving tariff classification disputes; the basis of central excise tariff is the HSN.
• Collector of Customs, Bombay v. Business Forms Ltd. (2005) 7 SCC 143 — Reaffirmed that in case of any doubt, HSN is a safe guide for ascertaining the true meaning of any expression used in the Tariff Act.
• Union of India v. Garware Nylons Ltd. (1996) 10 SCC 413 — Held that the burden of proof in classification matters rests on the taxing authorities; mere assertion is insufficient.
• Gastrade International v. Commissioner of Customs (2025) 8 SCC 342 — Held that the standard of proof in classification proceedings is preponderance of probability, not proof beyond reasonable doubt.
• CCE v. GAIL (India) 2022 SCC OnLine SC 2130 — Held that for a product to be classified as 'Motor Spirit' under Chapter 27, all three conditions must be satisfied; the use of the term 'other' in the supplementary note excludes reference to a class of oils.
• Atul Commodities Private Limited v. Commissioner of Customs (2009) 5 SCC 46 — Held that under Paragraph 2.3 of the Foreign Trade Policy, any doubt regarding classification under ITC (HS) shall be referred to DGFT whose decision shall be final and binding.
• CCE v. Madhan Agro Industries (India) P. Ltd. 2024 SCC OnLine SC 3775 — Relied upon for the proposition that HSN Notes can be safely referred to for resolution of classification disputes.
• CCE v. Bakelite Hylam Ltd. (1997) 10 SCC 350 — Relied upon to support the use of HSN Notes for tariff classification.
• CC v. Phil Corporation Ltd. (2008) 17 SCC 569 — Relied upon to support the use of HSN Notes for tariff classification.

Courtroom Arguments