Introduction:
In a significant ruling reinforcing the principle that confiscatory powers must rest on clear and unambiguous evidence, the Gujarat High Court ordered the release of imported bulk liquid cargo classified as Distillate Oil, which had been seized by customs authorities on the allegation of mis-declaration. The case arose from the seizure of imported distillate oil consignments belonging to Noya Infrastructure LLP, a trader engaged in industrial oil imports, by officers of the Directorate of Revenue Intelligence (DRI). The respondents included the Union of India through the Ministry of Finance and other customs authorities. A Division Bench comprising Justice A. S. Supehia and Justice Pranav Trivedi held that the laboratory test report relied upon by the authorities did not conclusively establish that the imported goods were diesel so as to warrant reclassification from Distillate Oil to Diesel. The Court emphasised that where expert opinion is ambiguous and lacks certainty, it would be unsafe to uphold seizure and detention, even on the test of preponderance of probability. This judgment assumes importance in the context of import classification disputes, limits of customs enforcement, and the evidentiary value of chemical test reports.
Arguments on Behalf of the Petitioners:
The petitioners, Noya Infrastructure LLP and connected entities, contended that they were lawfully engaged in the trading of industrial oils and allied products and had imported bulk liquid cargo of Distillate Oil through tank vessels at Pipavav Port, Amreli, Gujarat. It was submitted that on 01.08.2025, when the cargo was being transferred from the vessel into a Customs Bonded Storage Tank, the consignment was abruptly placed under investigation on the vague allegation of possible mis-declaration. Officers of the DRI drew representative samples in triplicate in the presence of the petitioners’ representatives, customs brokers, and independent surveyors, and thereafter detained the cargo under Section 110 of the Customs Act, 1962, by issuing a detention memo dated 01.09.2025.
The petitioners argued that despite completion of discharge operations and sample drawal, and notwithstanding clear public notices governing such imports—namely Public Notice No. 76/2020 issued by the New Customs House, Mumbai and Public Notice No. 14/2017 issued by the Commissioner of Customs, Kandla—the authorities failed to release the cargo or promptly furnish the test results. This prolonged detention, according to the petitioners, caused severe commercial prejudice and was wholly arbitrary.
When the Test Report dated 30.09.2025 was eventually produced, the petitioners contended that it did not definitively conclude that the imported goods were diesel. Instead, the report merely stated that the sample exhibited “characteristics of diesel fraction with a small amount of heavier fraction of hydrocarbons.” The petitioners argued that such an observation fell far short of establishing that the cargo satisfied all parameters of High Speed Diesel or Distillate Marine Fuel. They submitted that the respondents had selectively interpreted the report and travelled beyond its actual findings to justify seizure.
The petitioners further relied on precedent where similar consignments of Distillate Oil had been provisionally released by customs authorities themselves after acknowledging that it could not be said with certainty that the goods fulfilled all parameters of diesel. They also relied on Supreme Court jurisprudence to argue that in cases of ambiguity and lack of clarity in expert opinion, the benefit must go to the importer, and coercive action such as seizure cannot be sustained merely because some parameters appear to overlap. On these grounds, the petitioners sought quashing of the seizure memo dated 01.10.2025 and a direction for immediate release of the cargo.
Arguments on Behalf of the Respondents:
The respondents, representing the Union of India and the customs authorities, defended the seizure by asserting that the imported goods did not conform to the standards of Distillate Oil as prescribed under IS 16731:2019. They submitted that the Test Report dated 30.09.2025 clearly indicated non-compliance with the required parameters and, therefore, justified the inference that the goods were mis-declared. According to the respondents, the presence of diesel-like characteristics in the sample was sufficient to raise serious suspicion of attempted evasion, warranting detention and seizure under the Customs Act.
The respondents contended that classification of petroleum products is a highly technical matter and that customs authorities are entitled to rely on expert chemical analysis. They argued that the “most akin” test should be applied to determine the true nature of the imported goods, and once it is shown that the product closely resembles diesel, the declared classification as Distillate Oil becomes suspect. The respondents further submitted that the seizure was only an interim measure pending further adjudication and that the petitioners had alternative remedies available under the Customs Act.
It was also argued that the authorities were acting within their statutory powers to prevent revenue loss and misuse of petroleum products, and that judicial interference at the stage of investigation would undermine customs enforcement. On these grounds, the respondents urged the Court to dismiss the petition and allow the adjudicatory process to continue.
Court’s Judgment and Reasoning:
After examining the pleadings, records, and rival submissions, the Gujarat High Court allowed the petition and set aside the seizure memos issued by the DRI. The Court observed that the entire case of the respondents hinged on the Test Report dated 30.09.2025, which analysed 14 parameters to determine whether the imported cargo was Distillate Oil or Diesel. On a careful reading of the report, the Bench found that it did not definitively conclude that the goods were diesel. Instead, the report merely opined that the sample had characteristics of diesel fraction with a small amount of heavier hydrocarbons.
The Court held that such an opinion was inherently ambiguous and insufficient to justify reclassification of the goods from Distillate Oil to Diesel. Relying on Supreme Court precedents, the Bench reiterated that where expert opinion lacks clarity and certainty, it would be unsafe to draw adverse inferences even on the standard of preponderance of probability. The Court noted that the respondents had travelled beyond the scope of the test report and attributed conclusions that were not supported by its contents.
Applying the “most akin” test, the Court held that even this principle would operate in favour of the petitioners, since the authorities had failed to establish that the imported product met all essential parameters of High Speed Diesel or any other diesel variant so as to alter its classification. The Court also took note of a communication dated 28.10.2025 issued by the Central Revenue Control Laboratory (CRCL), Delhi, to Kandla customs authorities, which acknowledged similar ambiguities in test results of Distillate Oil samples. Discriminating against the petitioners in the face of such official acknowledgment was held to be impermissible.
Consequently, the Court quashed the action of detaining and seizing the imported bulk liquid cargo stored in the Customs Bonded Storage at Pipavav Port. The respondents were directed to release the cargo forthwith, subject to the condition that the petitioners file an end-use certificate before the customs authorities, as had been done in similar cases. The judgment thus reaffirmed that customs powers must be exercised with restraint and supported by clear, definitive evidence.