Supreme Court Tells Customs: Upgrade Labs to Properly Test Disputed Imports

In a significant ruling, the Supreme Court has set aside the confiscation of imported goods labelled as Base Oil SN 50, which customs authorities had misclassified as High-Speed Diesel (HSD)—a product restricted to import by designated State Trading Enterprises.

The Court concluded that the customs department failed to provide reliable scientific evidence that the consignment was indeed HSD. The decision highlighted the inadequacy of current laboratory testing facilities and discrepancies in expert reports.

The Problem: Incomplete Testing, Faulty Classification

A bench comprising Justices BV Nagarathna and N Kotiswar Singh found serious lapses in how customs handled the analysis. The imported goods had been tested against only 8–14 of the 21 standard parameters under IS 1460:2005, the benchmark for HSD. This, the Court noted, was insufficient to support such a serious classification and confiscation.

The bench criticized the department for laying down testing parameters it could not itself meet, and directed that laboratory infrastructure be upgraded within six months to enable full testing in line with IS specifications.

“This prolonged litigation could have been avoided if adequate testing facilities were available to verify all the BIS parameters,” the Court observed.

The ruling emphasized that any determination about whether a substance qualifies as a restricted item like HSD must be rooted in complete and conclusive testing. Without comprehensive analysis, the Court said, decisions based on partial or ambiguous results could not stand.

“When authorities themselves rely on IS standards for classification, they are duty-bound to ensure labs are equipped to carry out testing on all such standards,” the Court said.

To prevent similar legal disputes in the future, the Court instructed the authorities to ensure proper facilities are made available to test all essential characteristics—or at least those deemed crucial—to determine if a product meets the “most akin” test.

The Case: GASTRADE INTERNATIONAL vs Commissioner of Customs, Kandla

The dispute arose when the appellant-importers brought in a consignment of ‘Base Oil SN 50’. Customs authorities, relying on lab reports from Vadodara, CRCL Delhi, and IOCL Mumbai, claimed the substance was HSD. However, none of the reports covered the full range of IS 1460:2005 parameters, and key indicators—such as flash point—were either inconclusive or failed to establish that the substance definitively matched HSD specifications.

Even so, based on the principle of “preponderance of probability,” both the adjudicating authority and the High Court upheld the confiscation.

Supreme Court: "Preponderance of Probability" Isn’t Enough Here

The Supreme Court overruled that logic. Justice N Kotiswar Singh, writing for the bench, made it clear that technical classifications—especially for prohibited imports—require precise testing, not probabilistic inference.

“In light of ambiguous test results and non-committal expert opinions, it would be unsafe to conclude that the item is HSD—even using the preponderance of probability,” the judgment noted.

Instead, the Court insisted on applying the "most akin" test laid out under Rule 4 of the relevant classification rules—determining whether the product closely resembles a restricted item in essential features.

“The High Court relied on incomplete reports and an inconclusive expert opinion which failed to categorically state that the goods were HSD or ‘most akin’ to HSD,” the Court noted. “This gap in evidence renders the confiscation unjustified.”

What This Means Going Forward

This ruling reinforces the need for robust, science-backed customs classification processes—particularly when decisions involve penal consequences or affect trade rights.

In giving the benefit of the doubt to the importers, the Court not only reversed the confiscation order but also issued a directive: customs authorities must ensure that testing laboratories are upgraded within six months to be capable of comprehensive IS-standard testing.