Imported 'n-Hexane' Is A Separate Chemically Defined Compound Classifiable Under Chapter 29, Not 'Motor Spirit' Under Chapter 27: Supreme Court

"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." Supreme Court, in a significant ruling dated May 25, 2026, held that the imported product "n-Hexane" must be classified as a "Separate Chemically Defined Compound" under Chapter 29 of the Customs Tariff Act, rather than as "Motor Spirit" under Chapter 27.

A bench comprising Justice Aravind Kumar and Justice Prasanna B. Varale observed that the Revenue failed to prove the product was suitable for use as fuel in spark-ignition engines, a mandatory requirement for classification under Chapter 27.

The dispute arose when M/s Reliance Industries Limited (the Respondent) imported "n-Hexane" and claimed classification under Customs Tariff Heading (CTH) 2901.10. The Revenue, however, sought to reclassify it under Chapter 27 (CTH 2710.00) as a petroleum oil/motor spirit, primarily because its flash point was below 25°C and its distillation range was between 63°C and 70°C. The Customs Excise and Service Tax Appellate Tribunal (CESTAT) had earlier ruled in favour of the assessee, prompting the Revenue's appeal.

The primary question before the court was whether the imported "n-Hexane" should be treated as a Petroleum Oil/Motor Spirit under Chapter 27 or as a Pure Hydrocarbon existing as a Separate Chemical Compound under Chapter 29. The court was also called upon to determine the evidentiary weight of HSN Explanatory Notes and DGFT circulars in tariff classification.

Revenue Bears Burden Of Proof In Classification Disputes

The Court reaffirmed the settled legal principle that in matters of classification, the burden of proof rests entirely on the taxing authorities. Citing the precedent in Union of India v. Garware Nylons Limited, the bench noted that the Revenue must provide cogent material, oral or documentary, to show that an item is taxable in the manner claimed.

The bench emphasized that a mere assertion by the Department is insufficient to deny an article its "parentage" in a specific entry and consign it to a residuary or different category. In the present case, the Court found that the Revenue relied solely on physical properties like flash point and boiling point without proving the functional utility required for Chapter 27.

HSN Explanatory Notes Are Guiding Light For Interpretation

The Court highlighted the importance of the Harmonized System of Nomenclature (HSN) Notes as an internationally accepted guide for resolving tariff disputes. Referring to CCE v. Wood Craft Products Limited, the bench observed that once an expression used in the HSN Notes is in the same context as the Indian Tariff Acts, it is safe to import that meaning directly.

The bench noted that HSN Chapter Heading 29.01 specifically deals with acyclic hydrocarbons, including saturated ones like Hexane. The Court found that the chemical composition and description of the imported product perfectly matched the criteria for "commercially available pure Hexane" as defined in the HSN Notes for Chapter 29.

Specific Heading Preferred Over General Heading Under Rule 3(a)

Applying Rule 3(a) of the General Rules of Interpretation, the Supreme Court noted that a heading providing the most specific description must be preferred over one providing a general description. The bench observed that while Chapter 27 generally covers mineral fuels and oils, Chapter 29 specifically covers "separate chemically defined organic compounds."

The Court remarked that "n-Hexane" is a saturated acyclic hydrocarbon with a constant ratio of elements (C6H14) and a definitive structural diagram. This unique structural representation differentiates it from its isomers and justifies its placement in a more specific chemical category rather than a broad petroleum category.

Three Conditions Must Be Met To Classify Product As 'Motor Spirit'

A pivotal part of the judgment focused on the definition of "Motor Spirit" under the supplementary notes of Chapter 27. The Court, referencing CCE v. GAIL (India), clarified that for a product to be classified as Motor Spirit, three conditions must be satisfied: it must be a hydrocarbon oil, its flash point must be below 25°C, and it must be suitable for use as fuel in spark-ignition engines.

The bench observed that while the first two conditions were met, the Revenue failed to provide any evidence regarding the third condition. "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," the Court held.

"The contention of the Appellant-Revenue is sans cogent evidence to show that the imported substance is a Motor Spirit."

Presence Of Impurities Does Not Change Chemical Classification

The Revenue had argued that the presence of impurities made the product an admixture rather than a pure compound. However, the Court turned to Chapter Note 1 of Chapter 29, which clarifies that a "separate chemically defined compound" may contain impurities resulting solely from the manufacturing process, such as unconverted starting materials or by-products.

The bench noted that the impurities in the imported Hexane were of negligible percentage and did not suppress its essential characteristic. Relying on the Kirk-Othmer Encyclopedia, the Court found that the purity level of 63.93% recorded in the test report was congruent with commercially available pure Hexane, which naturally contains other isomers of hexane.

DGFT Clarification On Hexane Classification Is Binding

The Court placed heavy reliance on a Policy Circular dated July 14, 2004, issued by the Directorate General of Foreign Trade (DGFT). The circular categorically stated that the import of Hexane is covered under Chapter 29 of the Indian Trade Classification based on HSN.

Citing Atul Commodities Private Limited v. Commissioner of Customs, the Court held that any doubt regarding classification under the Foreign Trade Policy must be referred to the DGFT, whose decision is final and binding on the authorities. The bench noted that this circular alone was sufficient to dismiss the Revenue's appeals.

Revenue Cannot Be Unjustly Enriched Through Wrong Classification

In its concluding remarks, the Court warned against the implications of misclassification, noting that it could lead to the payment of hefty penalties or the wrong application of duty percentages. The bench observed that the duty under Chapter 27 is higher than Chapter 29, which often motivates such classification disputes by the Revenue.

The Supreme Court ultimately affirmed the CESTAT order and dismissed the Revenue's appeal. It concluded that a derivative taking the shape of an organic compound with a unique structural representation must remain severed from Chapter 27 and be placed under its specific home in Chapter 29.

Date of Decision: 25 May 2026