Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 13.11.2026
CESTAT Ahmedabad Orders Conditional Return of Bank Guarantee in Distillate Marine Oil Import Dispute
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad has allowed Rumi Petro Chem (India) Pvt. Ltd.βs appeal and directed that its bank guarantee be discharged once it produces an end-use certificate and executes a bond.
Background of the dispute
Rumi Petro Chem imported 2,491.475 metric tonnes of Distillate Marine Oil from Sohar, Oman, declaring the product under Customs Tariff Heading 2710 19 61. The company stated that the cargo was intended solely for industrial use.
Customs authorities examined the goods after the Central Revenue Control Laboratory (CRCL), Visakhapatnam reported that the sample was closely comparable to High Flash High Speed Diesel (HFHSD). HFHSD is a restricted product when imported by private importers. The laboratory report, however, also recorded a flash point of 52Β°C, below the 66Β°C minimum prescribed for HFHSD.
The sample also did not meet the cloud-point requirement for Distillate Marine Fuel under the relevant Indian Standard. CRCL observations raised the possibility that petroleum fractions may have been blended to lower the flash point, leading Customs to seize the cargo under Section 110 of the Customs Act, 1962.
Provisional release subject to strict conditions
The Commissioner of Customs, Kandla provisionally released the cargo on 9 November 2025. The order accepted, at the provisional stage, that the goods could not be treated as restricted HFHSD because they did not meet its specifications and not all mandatory parameters had been tested.
Nevertheless, release was made conditional on:
- an undertaking that the goods would not be used as automotive diesel, HFHSD, or vessel propulsion fuel;
- responsibility for ensuring equivalent end-use by any subsequent buyer;
- batch-wise records of storage, processing, sale, and consumption;
- a bond equal to 100% of the assessable value; and
- a renewable bank guarantee of βΉ1.0138 crore, equal to 10% of the assessable value.
The importer complied with these conditions and obtained release on 15 November 2025. It maintained that it did so under financial pressure because terminal charges had reached βΉ31.82 lakh by early December 2025 and were continuing to accrue.
Importerβs case: no conclusive finding of restricted diesel
Rumi Petro Chem argued that the laboratory evidence did not establish that the cargo was HFHSD. It emphasized the 14Β°C shortfall from the HFHSD flash-point requirement and relied on CRCL, New Delhiβs clarifications that the product fell within the broader category of βdiesel fractions,β which includes both HFHSD and distillate marine fuel.
CRCL, New Delhi also stated that deliberate blending could not be scientifically established on the available material. It later clarified that deciding whether the goods were βmost akinβ to HFHSD or Distillate Marine Fuel was not determinative, as the samples did not completely meet the specifications of any single Indian Standard. The laboratory recommended verification of end use.
Tribunal follows Gujarat High Court and earlier CESTAT rulings
CESTAT relied on decisions involving comparable imports, including Aparajita Energy Pvt. Ltd., Noya Infrastructure LLP, Prajakt Agro Industries Pvt. Ltd., and Quantum Petro Chem India.
Those decisions recognized that a cloud-point deviation alone cannot justify seizure where laboratory reports do not definitively establish that the goods are restricted HFHSD. They also treated end-use verification as the appropriate safeguard where the product falls broadly within diesel fractions but does not conclusively satisfy the standard for restricted diesel.
The Tribunal noted that, in similar cases, the Gujarat High Court had directed release subject to an end-use certificate and cooperation with the investigation. It further observed that the Department had stated it was following that approach for other similarly placed importers without insisting on a bank guarantee or similarly harsh release conditions.
Final ruling
CESTAT held that the condition requiring a bank guarantee was inconsistent with the Gujarat High Courtβs directions and the Tribunalβs earlier ruling in Prajakt Agro Industries. It therefore allowed the appeal.
The bank guarantee must be considered for discharge once Rumi Petro Chem produces the required end-use certificate and executes a bond. The ruling preserves Customsβ ability to monitor the declared industrial end use while removing the financial security condition that the Tribunal found unjustified in the circumstances. This decision reinforces that provisional-release conditions must be proportionate to the available evidence, particularly where testing does not conclusively classify imported petroleum products as restricted HFHSD.
Aadrikaa Legal Services is a trusted legal and regulatory support partner providing end-to-end legal solutions to law firms, corporate organizations, and businesses across India. We specialize in paralegal services, litigation support, tax and regulatory matters, delivering reliable, efficient, and result-oriented legal assistance.
Our services include comprehensive paralegal support, drafting and documentation, legal research, case management, litigation handling, and representation support across various judicial and quasi-judicial forums. We also assist in direct and indirect tax matters, customs, GST, corporate regulatory compliance, and legal advisory.
Source: CESTAT Ahmedabad
Handy Download:
Write to us at office@aadrikaalaw.com
Tel: +91-11-4999 2707
Leave a Reply