Commissioner of Customs, Kandla, Gujarat v. Reliance Industries Limited Citation: 2026 INSC 536 - Taxatopm
Tax Law - Burden of Proof - Onus on Taxing Authority - [...] in matters of classification of goods, the burden of proof rests on the shoulders of the Revenue. [...] The burden of proof is on the taxing authorities to show that the particular case or item in question is taxable in the manner claimed by them. Mere assertion in that regard is of no avail. [...] there should be material to enter appropriate finding in that regard and the material may be either oral or documentary. It is for the taxing authority to lay evidence in that behalf even before the first adjudicating authority. (Para 41)
Tax Law - Classification - Denial of Parental Enumeration - When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause. (Para 41)
Tax Law - Standard of Proof - Preponderance of Probability - [...] the burden of proof as regards the classification of any goods of importation is upon the Revenue/Customs authority and the standard of proof in proceedings under the Tariff Act is not "beyond reasonable doubt". However, whether "preponderance of probability" can be the appropriate test for classification under the Customs Act would be required to be examined in the light of the "General Rules for the interpretation of this Schedule" as provided in the First Schedule Import Tariff in Part 2 of the Tariff Act [...]. (Para 42)
Tax Law - General Rules for the Interpretation of the Import Tariff - Rule 3(a) - Specific over General - [...] Rule 3(a) speaks "When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: a) The heading which provides the most specific description shall be preferred to headings providing a more general description. [...]" The principle enunciated from the above extraction is that a specific heading is preferred over a general heading. (Paras 45, 46)
Tax Law - Harmonized System of Nomenclature - Interpretation Guide - [...] any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of central excise tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. (Para 51)
Tax Law - Customs Tariff Act 1975 - Chapter 27 Supplementary Note (a) - Essentials of Motor Spirit - Therefore, any product, to qualify under the broad rubric of "motor spirit" should be (a) a hydrocarbon oil excluding crude mineral oil; (b) which has a flash point below $25^{\circ}C$ and (c) which by itself, or in admixture with any other substance, is suitable for use as a fuel in spark ignition engines. [...] all the ingredients have to be satisfied. It is not sufficient if the product is a hydrocarbon oil or that it has a flash point below $25^{\circ}C,$ it should qualify both conditions, and also fulfil the last condition [...]. (Para 57)
Tax Law - Customs Tariff Act 1975 - Chapter Note 1 to Chapter 29 - Separate Chemically Defined Compound -Chapter Note 1 to Chapter 29 under HSN Explanatory Notes defines a "Separate Chemically Defined Compound" as "a substance consisting of one molecule species whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram." The trigger for a compound for it to be a Separate Chemical Compound arises only when the said two criteria are satisfied, i.e., its composition must be defined by a constant ratio of elements and that it can be represented by a definitive structural diagram. (Para 61)
Tax Law - Customs Tariff Act 1975 - Chapter Note 1 of Chapter 29 - Extent of Permissible Impurities - The term impurities under Chapter Note 1 of Chapter 29 are acquired by the compound from 4 factors during or after manufacturing process, namely, (1) unconverted starting materials, (2) impurities present in the starting materials (3) reagents used in the manufacturing process and (4) by products. (Para 62) [Context: The presence of negligible percentages of impurities like alternative isomers of hexane, sulfur, and chlorine does not alter the product's classification where they are unconverted starting materials and not deliberately added.]
Administrative Law - Foreign Trade Policy - Finality of Directorate General of Foreign Trade Decisions - [...] according to Para 2.3 of the Foreign Trade Policy regarding classification of items in the ITC (HS) (2002) [...] any doubt with respect to the classification of any item under the ITC (HS) shall be referred to the DGFT whose decision shall be final and binding. (Para 65)
Held: Appeal dismissed — the Supreme Court affirmed the CESTAT order holding that "n-Hexane" is properly classifiable under Chapter 29 (Customs Tariff Heading 2901.10 and Central Excise Tariff Heading 2901.90) as a separate chemically defined organic compound rather than under Chapter 27 as a petroleum oil/motor spirit since the Revenue failed to prove suitability for use in spark ignition engines.