Decision Of DGFT On Classification Of Items Under ITC (HS) Final And Binding; Hexane Not Petroleum Oil Or Motor Spirit: Supreme Court

The Court further held that n-Hexane, being a separately chemically defined saturated acyclic hydrocarbon existing in commercially pure form, could not be classified as a petroleum oil or motor spirit under Chapter 27 merely because its flash point was below 25°C.

The Court was hearing an appeal filed by the Commissioner of Customs, Kandla, challenging the judgment of the Customs Excise and Service Tax Appellate Tribunal affirming the classification of imported “n-Hexane” or “Exxsol Hexane” under Customs Tariff Heading 2901.10 and Central Excise Tariff Heading 2901.90.

A Division Bench of Justice Aravind Kumar and Justice Prasanna B. Varale observed: “This Court in Atul Commodities Private Limited v. Commissioner of Customs had held that according to Para 2.3 of the Foreign Trade Policy regarding classification of items in the ITC (HS) (2002) had observed that 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. In view of the same, the binding decision of the DGFT has clearly enunciated that the import of Hexane shall fall within the contours of Chapter 29.”

Additional Solicitor General S. Dwarkanath appeared for the Revenue. Senior Advocate Shyam Divan appeared for the respondent-assessee.

Background

The respondent-assessee imported “n-Hexane” and filed Bills of Entry claiming classification under Customs Tariff Heading 2901.10 and Central Excise Tariff Heading 2901.90 by describing the product as a saturated acyclic hydrocarbon existing as a separate chemically defined compound in commercially pure form. Pending chemical analysis, the goods were provisionally assessed.

Based on an SGS Redwood Analytical Test Report dated 10.05.2000, the Revenue issued a show cause notice alleging that the imported product was an admixture of hydrocarbons having a boiling range between 67°C and 70°C with a flash point below 25°C and was therefore classifiable under Chapter 27 as motor spirit. The Revenue relied upon the contention that the imported product was not a pure compound but a mixture of hydrocarbons.

The adjudicating authority accepted the Revenue’s case and classified the imported goods under Customs Tariff Heading 2710.00 and Central Excise Tariff Heading 2710.12. However, the Commissioner (Appeals) reversed the finding and held that Hexane was specifically identifiable under Chapter 29 of the HSN Explanatory Notes dealing with acyclic hydrocarbons.

The CESTAT thereafter dismissed the Revenue’s appeal and relied upon a DGFT Policy Circular dated 14.07.2004 clarifying that import of Hexane falls under Chapter 29 of the ITC (HS) Classification of Export and Import Items, 2002-07. Aggrieved thereby, the Revenue approached the Supreme Court.

Court’s Observation

The Supreme Court undertook an extensive examination of the physical and chemical properties of n-Hexane and observed that Hexane is a saturated acyclic hydrocarbon represented by the chemical formula C6H14. The Court noted that n-Hexane possesses a definitive structural arrangement distinct from its isomers and therefore qualifies as a separate chemically defined compound.

The Bench observed: “n-Hexane is a Saturated Acyclic Hydrocarbon with chemical formula C6H14, having a Distillation Range (boiling point) between 63 to 70°C with flash point at below 25°C as identically recorded by the SGS Test Report.”

The Court reiterated the settled principle that in matters relating to tariff classification, the burden of proof lies upon the Revenue. Referring to Union of India v. Garware Nylons Ltd. (1996) and Gastrade International v. Commissioner of Customs (2025), the Court observed that the Revenue must place cogent material to justify the classification claimed by it.

The Bench observed: “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.”

The Supreme Court thereafter examined the role of Harmonised System of Nomenclature Notes and reiterated that HSN Notes are internationally accepted interpretative guides used for resolving tariff classification disputes. The Court referred to CCE v. Wood Craft Products Ltd. (1995) and observed that HSN Notes constitute a safe guide for understanding expressions used in tariff statutes.

Referring to Rule 3(a) of the General Rules for Interpretation of HSN, the Court reiterated that a specific heading prevails over a general heading. The Bench observed that Chapter 29 specifically identifies Hexane as a saturated acyclic hydrocarbon, whereas Chapter 27 generally deals with petroleum oils and related products.

The Court observed: “The Rule makes it clear that if any good is classifiable under two headings, the one that is most specific shall be preferred over the one which is general.”

The Supreme Court rejected the Revenue’s contention that Hexane was classifiable as “motor spirit” merely because its flash point was below 25°C. The Court noted that Chapter 27 required fulfilment of three cumulative conditions, namely that the product should be a hydrocarbon oil, possess a flash point below 25°C and also be suitable for use as fuel in spark ignition engines. The Revenue, according to the Court, failed to establish the third requirement through any evidence.

The Court observed: “Apart from contending that the flash point of n-Hexane is below 25°C, nothing has been placed on record to conclusively arrive at a finding that n-Hexane imported by Respondent-Assessee was used as Motor Spirit which is suitable for use as fuel in spark ignition engines.”

The Bench further noted that the imported product was commercially pure Hexane obtained through fractional distillation of petroleum and that the presence of trace impurities did not alter its identity as a separately chemically defined compound. The Court observed that the impurities present were merely unconverted starting materials or by-products of the manufacturing process and were not deliberately added to create a mixture.

The Court also attached significant importance to the DGFT Policy Circular dated 14.07.2004, clarifying that import of Hexane falls under Chapter 29. Referring to Atul Commodities Pvt. Ltd. v. Commissioner of Customs (2009), the Court held that under Para 2.3 of the Foreign Trade Policy, classification disputes under ITC (HS) must be referred to the DGFT, whose determination is final and binding.

The Bench observed: “The instant appeals sought by the Appellant-Revenue ought to be dismissed by placing reliance on this Policy Circular dated 14.07.2004 alone.”

Conclusion

The Supreme Court held that the Revenue failed to discharge the burden of proving that the imported product constituted motor spirit falling under Chapter 27 of the Customs Tariff Act. The Court further held that n-Hexane was a saturated acyclic hydrocarbon existing as a separate chemically defined compound in commercially pure form and therefore correctly classifiable under Chapter 29.

The Court also held that the DGFT Policy Circular dated 14.07.2004, categorically clarifying the classification of Hexane under Chapter 29, was binding upon customs authorities and supported the respondent’s classification claim. Accordingly, the Supreme Court dismissed the appeal filed by the Revenue and affirmed the order passed by the CESTAT.

Cause Title: Commissioner of Customs, Kandla, Gujarat v. M/s Reliance Industries Limited (Neutral Citation: 2026 INSC 536)

Click here to read/download Judgment