Reliance Industries' n-Hexane Import Cannot Be Classified As Motor Spirit Merely For Low Flash Point: Supreme Court

The Supreme Court has ruled in favour of Reliance Industries Ltd. in its long-running customs classification dispute, holding that imported n-Hexane cannot be treated as motor spirit merely because its flash point is below 25°C.

The court held that the Customs Department failed to prove that the product satisfied all conditions required for such classification, including suitability for use as fuel in spark ignition engines.

A bench of Justice Aravind Kumar and Justice Prasanna B. Varale observed that the Revenue had failed to establish a key requirement for classifying the product as a motor spirit.

“Mere emphasis on the flash point being below 25°C will not render the imported product to be placed under Chapter 27, especially in the teeth of the judgment of this Court mandating sufficient satisfaction of all the 3 conditions. Thus, the contention the Appellant—Revenue is sans cogent evidence to show that the imported substance is a Motor Spirit.,” the bench observed.

The court held that a product could be classified as motor spirit only if it is a hydrocarbon oil, has a flash point below 25°C, and is suitable for use as fuel in spark ignition engines.

The dispute arose after Reliance imported “Exxsol Hexane/n-Hexane” and classified it as a saturated acyclic hydrocarbon and separately chemically defined compound. Customs authorities disputed this classification, contending that the imported product was an admixture of hydrocarbons falling within the motor spirit category because its flash point was below 25°C and its boiling range fell within the relevant range.

The adjudicating authority accepted the Revenue's stand. Relying on the SGS chemical test report, it held that the imported product had a flash point below 25°C and a distillation range between 64°C and 70°C, making it an admixture of hydrocarbons classifiable as motor spirit.

Reliance challenged this finding before the Commissioner (Appeals), which ruled in its favour. The appellate authority held that Hexane is specifically recognised under the Harmonized System of Nomenclature as an acyclic hydrocarbon. It also observed that internationally accepted classification guidance supported Reliance's stand.

The Customs, Excise and Service Tax Appellate Tribunal later upheld that decision. It found that commercially pure Hexane would remain classifiable as such even if small impurities were present. It also relied on a DGFT policy circular clarifying that Hexane imports fall under the classification claimed by Reliance.

Before the Supreme Court, the Revenue argued that the imported product was a mixture of hydrocarbons and therefore excluded from the category claimed by Reliance. It contended that the product's flash point and boiling range meant it should be treated as motor spirit.

Rejecting this, the Supreme Court undertook a detailed examination of the chemical composition and structural properties of n-Hexane. The court noted that n-Hexane is a saturated acyclic hydrocarbon with the chemical formula C6H14 and a definitive linear molecular structure, distinguishing it from its isomers.

“The Appellant-Revenue has failed to discharge its duty to prove that the imported product is a Motor Spirit,” the bench held.

“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 court observed.

The bench observed that the Revenue had placed material only to show that the flash point was below 25°C. However, it had failed to produce evidence showing that the imported product was suitable for use as motor spirit.

The court also held that Hexane is specifically recognised under international classification notes as a saturated acyclic hydrocarbon. Applying the principle that a specific tariff entry prevails over a general one, it concluded that the imported product was correctly classified as claimed by Reliance.

The Supreme Court accordingly dismissed the Revenue's appeal and upheld the CESTAT ruling in favour of Reliance.

For Petitioner: Additional Solicitor General S. Dwarkanath, Advocate Arijit Prasad, Advocate Abhyudey Kabra, Advocate-on-Record Gurmeet Singh Makker, Advocate Rajeshwari Shankar, Advocate Navanjay Mahapatra.

For Respondent(s): Senior Advocate Shyam Divan, Advocate-on-Record K R Sasiprabhu, Advocate Jaydeep Patel, Advocate Vipin Jain, Advocate Shilpa Balani, Advocate Vishnu Sharma A S, Advocate Arpit Jacob Varaprasad, Advocate Adit Deshmukh, Advocate Namrata Saraogi, Advocate-on-Record Khaitan & Co., Advocate Vanita Bhargava, Advocate Ajay Bhargava, Advocate Nandini Chauhan, Advocate Abhay Agnihotri, Advocate Tijil Thakur.