'n-Hexane' Not 'Motor Spirt' For Customs Duty : Supreme Court Dismisses Revenue Appeal Against Reliance Industries

The Supreme Court has observed that the imported product 'n-hexane', mainly used in making chemicals or extracting vegetable oils, could not be classified as a petroleum product/motor fuel, to attract lower duty, merely because it has a low flash point.

Dismissing the Custom Department's appeal, a bench of Justice Aravind Kumar and Justice Prasanna B. Varale granted relief to Reliance Industries Ltd. while upholding the Customs Excise and Service Tax Appellate Tribunal (CESTAT) decision to classify 'n-hexane' as a solvent compound, not 'motor fuel'. Thus, the Court held that the imported 'n-hexane' would fall under Chapter 29 of the Customs Tariff, which attracts a lower duty.

The dispute centered on the classification of n-Hexane, a saturated acyclic hydrocarbon with the chemical formula C₆H₁₄, imported by Reliance Industries. While the assessee classified the product under Chapter 29 (CTH 2901.10/CETH 2901.90), the Customs Department sought to classify it under Chapter 27 as “Motor Spirit,” attracting a higher duty liability.

Rejecting the Revenue's contention, the judgment authored by Justice Aravind Kumar held that the Department had failed to discharge its burden of proving that n-Hexane satisfied all the statutory conditions necessary for classification as “Motor Spirit.”

The Court reiterated that for classification under Chapter 27 as “Motor Spirit,” three cumulative conditions must be established: first, the product must be a hydrocarbon oil; second, it must have a flash point below 25°C; and third, it must be suitable for use as fuel in spark ignition engines.

While the Revenue succeeded in establishing that n-Hexane had a flash point below 25°C, the Court found that no evidence had been placed on record to show that the imported product was suitable for use as fuel in spark ignition engines.

“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 SGS Chemical Test report only records that the flash point of n-Hexane is below 25°C but as already discussed supra, it was the bounden duty of the Appellant-Revenue to provide cogent evidence to indicate the use of the imported product as a Motor Spirit.”, the court observed.

..".n-Hexane is rightly classifiable under Chapter 29, more particularly under CTH 2901.10 and CETH 2901.90.", the court observed.

The Court also relied on a Directorate General of Foreign Trade (DGFT) Policy Circular dated July 14, 2004, which had clarified that Hexane falls under Chapter 29 of the ITC (HS) Classification. The bench held that such classification clarifications issued by the DGFT are binding on authorities.

In terms of the aforesaid, the appeal was dismissed.

Headnote

Customs and Central Excise Tariffs – Classification of "n-Hexane" or "Exxsol Hexane" – Competing Entries between Chapter 27 (Petroleum Oils/Motor Spirit) and Chapter 29 (Separate Chemically Defined Organic Compounds/Pure Hydrocarbons) – Held - The imported product "n Hexane" or "Exxsol Hexane", which is a Saturated Acyclic Hydrocarbon with the chemical formula , is correctly classifiable under Customs Tariff Heading (CTH) 2901.10 and Central Excise Tariff Heading (CETH) 2901.90 as a separate chemically defined organic compound in its pure commercial form, and not under Chapter 27 as a Petroleum Oil or Motor Spirit - The initial burden of proof rests entirely on the Revenue to show that an item is taxable in the manner claimed by them - The Revenue failed to discharge this burden by merely demonstrating that the product's flash point was below and its distillation range was between to - To classify a product as "Motor Spirit" under Chapter 27, all three conditions stipulated in the Supplementary Notes must be satisfied: (i) it must be a hydrocarbon oil, (ii) it must have a flash point below , and (iii) it must be shown to be suitable for use as fuel in spark-ignition engines - The Revenue led no evidence to establish the third condition, whereas the Assessee demonstrated its use as an industrial solvent. [Relied on CCE v. GAIL (India), 2022 SCC OnLine SC 2130; Paras 50 – 58]

Interpretation via HSN Explanatory Notes & Impurities - Harmonized System Nomenclature (HSN) Notes serve as a safe guide for resolving tariff classification disputes when the expressions used are pari materia with the Tariff Acts - Under Chapter Note 1 to Chapter 29, a "Separate Chemically Defined Compound" is defined by a constant ratio of elements and a definitive structural diagram - While n-Hexane shares its molecular formula (C6H14) with its four other isomers, it possesses a distinct, linear acyclic structural formation that differentiates its physical and chemical properties - the presence of minor, non-deliberate impurities resulting solely from the fractional distillation process (such as unconverted starting materials) does not alter its character or convert the compound into an excluded acyclic isomer mixture under Chapter 27 – Held that as per Paragraph 2.3 of the Foreign Trade Policy, any doubt regarding the classification of an item in the Indian Trade Classification (Harmonized System) [ITC (HS)] must be referred to the Directorate General of Foreign Trade (DGFT), whose decision is final and binding - The DGFT vide Policy Circular No. 40(RE-2003)/2002-2007 dated 14.07.2004 explicitly clarified that the import of Hexane falls within Chapter 29, which binds the customs authorities. [Relied on CCE v. M/s Wood Craft Products Limited, (1995) 3 SCC 454; Atul Commodities Private Limited v. Commissioner of Customs, (2009) 5 SCC 46; Paras 23-51, 65-71]

Cause Title: COMMISSIONER OF CUSTOMS, KANDLA, GUJARAT VERSUS M/S RELIANCE INDUSTRIES LIMITED

Citation : 2026 LiveLaw (SC) 544

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Appearance:

For Appellant(s) : Mr. S Dwarkanath, A.S.G. Mr. Arijit Prasad, Adv. Mr. Abhyudey Kabra, Adv. Mr. Gurmeet Singh Makker, AOR Ms. Rajeshwari Shankar, Adv. Mr. Navanjay Mahapatra, Adv.

For Respondent(s) : Mr. Shyam Divan, Sr. Adv. Mr. K. R. Sasiprabhu, AOR Mr. Jaydeep Patel, Adv. Mr. Vipin Jain, Adv. Ms. Shilpa Balani, Adv. Mr. Vishnu Sharma A S, Adv. Mr. Arpit Jacob Varaprasad, Adv. Mr. Adit Deshmukh, Adv. Ms. Namrata Saraogi, Adv. M/S. Khaitan & Co., AOR Mrs. Vanita Bhargava, Adv. Mr. Ajay Bhargava, Adv. Ms. Nandini Chauhan, Adv. Mr. Abhay Agnihotri, Adv. Ms. Tijil Thakur, Adv.