Condensate Can’t Be Classified as ‘Light Oil’ Without Testing 90% Distillation at 210°C: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad has held that goods cannot be classified as “light oil” unless the statutory requirement of 90% distillation at 210°C is strictly satisfied through proper testing. The bench of Somesh Arora (Judicial Member) and Satendra Vikram Singh (Technical Member) while allowing a batch of appeals including that of Bharat Enterprise, set aside the demands of differential duty, confiscation, and penalties raised by the department. The dispute originated from imports of bulk liquid cargo described as “condensate” at Kandla Port. The goods were supported by quality certificates issued at the load port and were cleared by customs authorities under heading 2710 after due assessment. Subsequently, the Directorate of Revenue Intelligence (DRI) initiated an investigation, suspecting misclassification and alleging that the goods were in fact “light oil” falling under a different tariff entry attracting higher duty. The department’s case was primarily based on test reports indicating that 90% of the product distilled at around 208°C. Relying on this, it was alleged that the goods satisfied the criteria of “light oil” under Chapter Note 4 of Chapter 27, which deals with classification based on distillation characteristics. Accordingly, show cause notices were issued proposing reclassification, recovery of differential duty running into crores, confiscation of goods, and imposition of penalties on importers as well as other associated parties. However, the Tribunal found serious flaws in the department’s approach. It observed that the statutory requirement clearly mandates that 90% or more of the product must distil at 210°C (including losses), and not at any temperature below it. In the present case, there was no conclusive evidence demonstrating distillation at the prescribed temperature of 210°C. In fact, even the show cause notice admitted that in the absence of such data, an exact inference could not be drawn. The Tribunal further noted that the department relied on test results derived from samples drawn from co-mingled stock, which compromised the reliability of the findings. Since the samples did not represent the specific consignments in question, the evidentiary value of such testing was significantly weakened. On the other hand, the importers relied upon certificates issued by independent agencies such as Intertek, which indicated different distillation parameters, including 90% recovery at higher temperatures. The Tribunal found that these reports were not effectively rebutted by the department, thereby creating doubt regarding the correctness of the reclassification. Importantly, the Tribunal relied on the Supreme Court’s judgment in Krishna Technochem Pvt. Ltd., which clarified that the test for classification must strictly adhere to the condition of distillation at 210°C, and not “up to” 210°C. Applying this principle, the Tribunal held that the department failed to discharge its burden of proving that the goods met the criteria for classification as “light oil.” The Tribunal also examined the issue of limitation and found that the extended period could not be invoked in the absence of any wilful misstatement or suppression of facts. The goods had been cleared after due assessment based on available test reports, and therefore, the allegation of deliberate misclassification was not sustainable. Further, the argument of revenue neutrality raised by the appellants was noted, as the differential duty primarily pertained to specific CVD, which was otherwise available as credit. This aspect also weighed against the department’s case for sustaining the demand and penalties. The Tribunal allowed the appeals, setting aside the reclassification, duty demands, confiscation orders, and penalties imposed on the importers and other parties. It also held that in the absence of evidence showing knowledge or involvement in any alleged misdeclaration, penalties on intermediaries such as customs brokers could not be sustained. Case Details Case Title: Bharat Enterprise Versus Commissioner Of Customs- Kandla Citation: JURISHOUR-797-CES-2026(AHM) Case No.: Customs Appeal No. 241 of 2011-DB Date: 15.04.2026 Counsel For Appellant: Rajesh Chhibber, Advocate & Shri Vikas Mehta, Consultant Counsel For Respondent: R Kumar, Superintendent (AR) Click Here To Read Order Read More: Hearsay Statement Alone Can’t Prove Gold Smuggling: CESTAT Orders Release of Seized Gold

Condensate Can’t Be Classified as ‘Light Oil’ Without Testing 90% Distillation at 210°C: CESTAT

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