The “Most Akin” Test in Customs Classification: Gastrade International v. Commissioner of Customs, Kandla

1. Introduction

This commentary examines the Supreme Court of India’s decision in Gastrade International v. Commissioner of Customs, Kandla (2025 INSC 411). The controversy pivoted on whether the imported goods, declared by private parties as “Base Oil,” should instead be classified as “High Speed Diesel” (HSD) under the relevant customs and import regulations. The classification result was critical: if the goods were genuinely “HSD,” they would be classified as a prohibited item for private importers, leading to confiscation and penalties. Conversely, if deemed “Base Oil,” importation would be permissible under less restrictive guidelines.

Three levels of adjudication—(1) the Adjudicating Authority (Commissioner of Customs), (2) the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), and (3) the High Court of Gujarat—rendered conflicting decisions. Ultimately, the Supreme Court reversed the High Court’s ruling and clarified how the correct classification test must be applied. This ruling emphasizes the need for complete scientific testing or, if not possible, the proper application of what the Court termed the “most akin” test under the Customs Tariff Act rules for interpreting commodities.

The parties involved include several importers (collectively referred to as “Gastrade International” and others) who declared their goods as “Base Oil SN 50.” The Department of Revenue Intelligence (DRI) claimed that laboratory tests suggested the goods were “High Speed Diesel” conforming in part to IS 1460:2005 specifications and, as such, were a restricted/prohibited import for private entities. Prolonged litigation ensued, culminating in the Supreme Court’s clarificatory judgment.

2. Summary of the Judgment

The Supreme Court’s decision can be summarized under the following points:

• Conflicting Laboratory Reports: Three different laboratories produced partial compliance reports with regard to the Indian Standard IS 1460:2005 (for HSD). While each indicated some similarity to HSD (on selected parameters), none conclusively found the goods satisfied all parameters.
• Divergent Tribunal and High Court Rulings:
  • The Adjudicating Authority concluded the product was HSD due to partial matching of parameters and imposed confiscation and penalties.
  • CESTAT reversed that finding, holding that since all 21 specifications had not been tested, the Department could not definitively claim the product was HSD.
  • The High Court of Gujarat reinstated the view of the Adjudicating Authority, applying a “preponderance of probability” standard in the Department’s favor.
• The Supreme Court’s Ruling: The Supreme Court found that partial testing (only 8, 12, and then 14 parameters out of 21) did not yield a conclusive diagnosis of “HSD.” The Court held that the “preponderance of probability” test was an inaccurate standard in this specific classification context. Instead, if a substance does not fully match the enumerated specification for HSD, the authorities should apply the “most akin” test laid out under Rule 4 of the General Rules of Interpretation in the Customs Tariff. Because the tests were incomplete and inconclusive, the Supreme Court gave the importers the benefit of the doubt.
• Key Directives: As a broader policy directive, the Court directed the Customs Authorities to ensure that proper testing facilities exist to check all relevant parameters for classification disputes in the future, avoiding similar controversies and inconclusive outcomes.

3. Analysis

3.1 Precedents Cited

The Court’s analysis highlighted several relevant principles and precedents:

• Constitution of the Tariff Act & Evidence Act (1872): The judgment underscored that customs classification should adhere strictly to the Tariff Act’s headings, including the Supplementary Notes defining key petroleum products.
• General Rules for Interpretation of the Customs Tariff Schedule (Rule 4): This rule provides for classification under the heading that is “most akin” if a product does not conclusively fit an existing heading’s complete specification. The judgment underscored that classification hinges on scientific parameters and the product’s closest resemblance.
• Evidence Act Principles: The Court cited the concept that in civil proceedings, proof commonly rests on a “balance of probabilities.” However, it cautioned that in classification matters involving specific technical criteria, partial compliance cannot automatically equate to full classification.
• Expert Opinion and Flash Point Issue: Decisions such as Durga Oil Company v. State of U.P. were mentioned. The Court reminded that expert evidence, while important, is not conclusive and must provide thorough, unambiguous justifications—particularly for a “flash point” parameter that significantly influences classification under the Petroleum Act.

3.2 Legal Reasoning

The Court’s legal reasoning can be distilled into these essential steps:

1. Burden of Proof and Standard Applied: While ordinarily the Department need only prove its case on a balance of probabilities in civil proceedings, the Court found that classification under the Tariff Act requires compliance with specific enumerated technical parameters. Partial compliance with only some of the parameters (e.g., 14 out of 21) cannot conclusively prove the goods as HSD.
2. Incomplete Laboratory Testing: Each laboratory lacked the capacity to verify all parameters of IS 1460:2005. This left the adjudicating forums with incomplete data and inconclusive expert opinions. The Court noted the flash point in the tested samples often exceeded 93°C, a tricky area because HSD typically has a specified minimum flash point of 66°C, but there is complexity over the maximum permissible limit. The experts evaded direct commentary on this crucial question.
3. Rejection of “Preponderance of Probability” in This Context: The High Court used the phrase “preponderance of probability” to conclude that the goods were HSD. The Supreme Court explained that, for classification under the Tariff Act, the “most akin” test, set out in Rule 4, is more appropriate than mere balancing of contested probabilities. The better approach is to decide whether the product is “most akin” to HSD or some other enumerated product, after thorough, parameter-based testing.
4. The “Most Akin” Test: The Court gave detailed guidance on how to properly apply Rule 4 of the General Rules for Interpretation. Where an imported product fails to fit precisely into one category (because it does not meet all the enumerated specifications) but partially resembles multiple categories, the correct inquiry is which commodity it is “most akin” to. Only a robust scientific procedure can determine that degree of resemblance.
5. Conclusion and Outcome: Given the inconclusiveness of existing tests, the Court decided it was not feasible or practical—years after the import—to attempt a further retest. Instead, the benefit of doubt went to the importer. The Court reversed the High Court decision and directed that the goods be treated as not conclusively proven to be HSD.

3.3 Impact

The judgment holds significant implications for future customs classification and litigation:

• Ensuring Comprehensive Lab Testing: Customs authorities must equip laboratories to test all relevant parameters for classification, particularly in high-stakes scenarios (like restricted imports). Partial testing may no longer suffice.
• Refined Classification Method: The emphasis on the “most akin” test clarifies that incomplete similarity to an enumerated specification does not automatically prove classification. Instead, the product must strongly or closely resemble the given standard in all essential parameters.
• Expert Opinions: Courts will demand more definitive, precise analysis from laboratory experts. Vague statements (e.g., the product “has some characteristics of HSD” but not all) will not be enough for penal confiscation.
• Legal Certainty and Administrative Uniformity: This ruling aims at preventing inconsistent outcomes and ensuring that import rules are enforced transparently and scientifically. Enhanced facilities and rigorous application of the “most akin” criterion will likely reduce such disputes.

4. Complex Concepts Simplified

• Classification Under the Customs Tariff Act: Each product must belong to a specific tariff heading or sub-heading. Classification often depends on technical specifications (e.g., chemical composition, flash point).
• IS 1460:2005 (High Speed Diesel Specifications): This is an Indian Standard enumerating about 21 parameters (e.g., flash point, viscosity, sulphur content) to define what qualifies as HSD. Failing to meet one or several of these parameters could undermine classification as HSD.
• Flash Point in Petroleum Products: This is the minimum temperature at which the vapors of a petroleum product momentarily ignite when exposed to a flame. The classification of petroleum products into classes A, B, or C under the Petroleum Act depends heavily on flash point thresholds.
• The “Most Akin” Test (Rule 4): When a product does not exactly fit any standard classification heading, but partially overlaps multiple categories, the inquiry is which category does it most closely resemble? This approach avoids artificially forcing an incomplete match and is especially relevant for new or borderline products.

5. Conclusion

In Gastrade International v. Commissioner of Customs, Kandla, the Supreme Court underscored that proper classification of imported goods requires adherence to technical specifications, not merely an approximation of evidence. Since none of the testing laboratories conclusively proved that the imported oil matched all HSD parameters under IS 1460:2005—and because the expert provided evasive or incomplete answers on the critical flash point parameter—the “preponderance of probability” argument was deemed insufficient. Instead, the Court reaffirmed that the correct classification method is governed by the “most akin” principle under Rule 4 of the Customs Tariff Interpretation Rules.

By setting aside the High Court’s ruling, the Supreme Court gave the importers the benefit of the doubt and directed improvements in future testing facilities. The result shapes a new precedent: when classification depends on prescribed standards (particularly for restricted goods), partial compliance cannot alone justify confiscation and penalties. A product must be shown to be “most akin” to a defined tariff heading, supported by comprehensive and conclusive testing.

This milestone ruling will likely recalibrate how Customs authorities approach laboratory testing and legal interpretations of the Customs Tariff, emphasizing thorough scientific assessment before finalizing a classification that triggers confiscatory or penal consequences.