The Supreme Court has held that imported n-Hexane / Exxsol Hexane is classifiable under Chapter 29, specifically CTH 2901.10 and CETH 2901.90, as a saturated acyclic hydrocarbon existing as a separate chemically defined compound in pure commercial form, and not under Chapter 27 as petroleum oil or motor spirit. The Court held that where a product is specifically covered by Chapter 29 and satisfies the description of a separate chemically defined compound, that specific entry must prevail over the more general petroleum classification under Chapter 27.
The Court further held that the Revenue cannot classify the product as motor spirit merely by showing that the flash point is below 25°C and the boiling range corresponds to special boiling point spirits; it must also prove suitability for use as fuel in spark ignition engines. Since the Revenue failed to discharge that burden, and since the HSN Notes and DGFT clarification supported classification under Chapter 29, the appeal was dismissed and the CESTAT order was affirmed.
A Two-Judge Bench comprising Justice Aravind Kumar and Justice Prasanna B. Varale observed that, in matters of tariff classification, the burden of proof lies on the Revenue, and mere assertion is insufficient unless supported by material, oral or documentary. The Bench observed that HSN Explanatory Notes are a safe and authoritative guide for resolving classification disputes, and that Rule 3(a) of the General Rules for Interpretation requires preference for the heading which provides the most specific description over one which is more general.
The Bench examined Chapters 27 and 29 of the HSN Notes and the corresponding tariff entries, and found that Chapter 29 specifically covers acyclic hydrocarbons, including Hexanes, whereas Chapter 27 excludes separately chemically defined organic compounds in pure or commercially pure state, save for specified exceptions.
The Bench further observed that for classification as “motor spirit” under Chapter 27, the product must satisfy all three conditions: it must be a hydrocarbon oil, have a flash point below 25°C, and be suitable for use as fuel in spark ignition engines; in the present case, the Revenue produced no evidence to establish the third requirement.
The Bench also held that the presence of impurities arising from the manufacturing process does not by itself take the product out of Chapter 29, so long as no substance is deliberately added or deliberately left behind to render the product suitable for a specific use. On facts, the Bench found that n-Hexane retained its identity as a separate chemically defined compound in commercially pure form, and that the DGFT circular classifying Hexane under Chapter 29 was binding in the context of ITC (HS) classification.
Briefly, the respondent-assessee imported “Exxsol Hexane RD / Hydrosol n-Hexane” and filed the Bill of Entry by classifying the goods under Customs Tariff Heading 2901.10 and Central Excise Tariff Heading 2901.90 as a saturated acyclic hydrocarbon existing as a separate chemically defined compound in commercially pure form. Pending chemical examination, the goods were provisionally assessed. Based on the SGS Redwood Test Analysis Report dated May 10, 2000, the Revenue issued a show cause notice proposing classification under Chapter 27, namely CTH 2710.00 and CETH 2710.12, on the footing that the imported product was a mixture of various hydrocarbons, had a distillation range between 67°C and 70°C, and had a flash point below 25°C, and was therefore to be treated as petroleum oil / motor spirit.
The adjudicating authority accepted the Revenue’s case and classified the goods under Chapter 27. On appeal, the Commissioner (Appeals) reversed that finding by holding that Hexane is specifically covered under Heading 2901.10 in the HSN scheme, and CESTAT affirmed that view, inter alia relying on the HSN Explanatory Notes, the Kirk-Othmer Encyclopedia, and the DGFT Policy Circular dated July 14, 2004 clarifying that Hexane falls under Chapter 29.
