Inconclusive Lab Report Cannot Support Distillate Oil Reclassification As Diesel: Gujarat High Court Orders Release Of Imported Cargo Seized For Alleged Non-Compliance With Distillate Criteria
Safiya Malik
The High Court of Gujarat Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi directed the release of imported distillate oil that had been detained and seized by customs authorities on the ground that it failed to meet the prescribed parameters for distillate oil. The dispute arose after a laboratory report recorded a deviation in the cloud point and noted that the sample had characteristics of a diesel fraction with a small amount of heavier hydrocarbons, which authorities treated as supporting a case of misdeclaration and restricted import. The Bench held that the test report did not definitively conclude that the product was diesel to a degree that would warrant a change in classification from distillate oil to diesel, and ordered release of the cargo, subject to submission of an end-use certificate. Distillate oil is a liquid fuel distilled from crude petroleum.
The writ petitions arose from the seizure and detention of bulk liquid cargo imported and declared as Distillate Oil by the petitioners, who are engaged in trading of industrial oil and allied products. The cargo was imported through a tank vessel and stored at a customs bonded facility after discharge at a Gujarat port. During investigation for alleged mis-declaration, officers of the Directorate of Revenue Intelligence drew samples and sent them for laboratory testing. Based on a test report issued by the Central Revenues Control Laboratory, the authorities alleged that the samples did not meet certain parameters prescribed under Indian Standards for Distillate Oil, particularly in relation to cloud point, and recorded that the samples showed characteristics of a diesel fraction. Consequently, seizure memos were issued and the cargo was detained.
The petitioners challenged the seizure, contending that the test report did not conclusively establish that the imported product was diesel or a restricted petroleum product, and relied on earlier instances where similar cargo was provisionally released by customs authorities at another port on the basis of expert clarification from the laboratory. The respondents opposed the petitions, asserting that the goods were mis-declared, failed prescribed standards, and were in substance diesel or high flash high speed diesel, which is restricted for import.
The Court examined the pleadings, laboratory reports, and expert communications placed on record. It recorded that “the entire case of the respondents hinges on the Test Report dated 30.09.2025” and noted that the report identified fourteen parameters for determining whether the product could be treated as Distillate Oil. The Bench observed that “the Test Report definitely concludes by holding that ‘Based on the above tested parameters, the sample under reference does not meet the requirement of Distillate Oil as per IS 16731:2019 with respect to parameter at Sr. No.14’.”
At the same time, the Court noted the caveat in the report stating that “the Distillate Oil has the characteristics of diesel fraction with a small amount of heavier fraction of hydrocarbons.” It recorded that the report was “not definite that the Distillate Oil is in fact diesel” and that the opinion only reflected certain characteristics rather than a categorical conclusion.
The Bench placed reliance on expert clarification issued by the Director of CRCL in respect of similar cargo seized at another port, where it was stated that “whether the sample under reference is more akin to HFHSD … or Distillate Marine Fuel … is of no consequence as all these products are diesel fraction.” It further noted that the laboratory had clarified that non-conformity with one or more parameters did not necessarily lead to a definitive classification.
On the issue of cloud point, the Court recorded the clarification that “if the intended use of the sample under reference is as marine fuel in ships in the colder weather conditions, the cloud point requirement becomes significant. For other usage the cloud point is not a significant parameter.” The Bench observed that there was “no definite conclusion with regard to the cloud point, and it depends upon the vessel being operated in specific areas.”
Relying on the Supreme Court’s exposition of the “most akin” test, the Court recorded that “in view of the ambiguity and lack of clarity in the expert opinion/laboratory test results, it would be unsafe to draw the inference that the Department had been able to prove its case.” Applying this test, it found that the ambiguity operated in favour of the importers and that the respondents had not definitively established that the goods were diesel so as to alter their classification.
The Court directed that “the impugned Seizure Memos issued by the Intelligence Officer of the DRI are hereby quashed and set aside.” and “the action of the respondent authorities in detaining the imported bulk liquid cargo of Distillate Oil … is hereby quashed and set aside.” The Bench directed the authorities “to release the bulk liquid cargo of Distillate Oil imported through the vessels.” It clarified that, consistent with earlier practice, “the traders shall file an end-use certificate before the Custom authority.” The rule was made absolute accordingly.
Advocates Representing the Parties
For the Petitioners: Mr. S.N. Soparkar, Senior Advocate with Mr. Amir S. Pathan and Mr. Virat G. Popat; Mr. Mihir Joshi, Senior Advocate with Mr. Kunal Nanavati and Mr. Kaustubh Shrivastav.
For the Respondents: Mr. Anurag Oza, Senior Standing Counsel with Mr. Pradip D. Bhate; Mr. C.B. Gupta.
Case Title: Noya Infrastructure LLP & Ors. v. Union of India & Ors.
Neutral Citation: 2025: GUJHC:70391-DB
Case Numbers: R/Special Civil Application Nos. 12943, 14559, 14552 and 14562 of 2025
Bench: Justice A.S. Supehia, Justice Pranav Trivedi
