Customs Dept. claimed Imported Cashews as "Raw": CESTAT Remands Classification Dispute Citing Ambiguous Test Report [Read Order]

The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) remanded a classification dispute, citing ambiguities in the test report used by the Customs Department to classify imported cashew kernels as "Raw”.

Olam Agro India Pvt Ltd., the appellant imported 389,000 kg of cashew kernels, labeling them as "Roasted Cashew Kernels" under Tariff Item 20081910, claiming an exemption from customs duty.

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Customs authorities questioned this classification, suspecting the goods were actually "Raw Cashew Kernels (broken and shelled)," classified under Tariff Item 08013210 which attracted higher duties.

The samples were sent to the CEPCI Laboratory for testing. The report suggested that the cashews were not fully roasted, supporting the Customs' view that they were raw. Based on this report, Customs finalized the classification as raw and demanded a differential duty of over Rs.8,80,16,885.

The appellant appealed before the Commissioner (Appeals) arguing the CEPCI report was ambiguous and flawed, with discrepancies in the standards for moisture content. Despite these objections, the Commissioner (Appeals) upheld the Customs Department’s decision.

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Aggrieved, the appellant challenged the Commissioner (Appeals)’s order before the CESTAT arguing that the product should be classified under CTH 20081910 (roasted category) based on purchase orders and certificates of origin.

The appellant’s counsel contended that the moisture content standards used by the testing agency (CEPCI) were inconsistencies in determining whether cashews are "roasted" or "raw." The counsel claimed violations of natural justice as no opportunity for cross-examination of CEPCI representatives and disclosure of test reports incomplete.

On the other hand, the customs department relied on the CEPCI's test reports, indicating that the cashews were "plain/raw" based on specific parameters like moisture content and visual characteristics. The department argued that the classification under Chapter 8 was appropriate, as the mild roasting did not alter the essential character of the cashew as a dry nut.

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The two-member bench comprising R. Muralidhar (Judicial Member) and A.K. Jyotishi (Technical Member) observed that the core issue was whether the goods should fall under Chapter 8 or Chapter 20 and the absence of clear statutory definitions distinguishing between "raw" and "roasted" cashews.

The tribunal found that the CEPCI Laboratory’s test report used ambiguous language, with terms like “normally” and “may” to describe critical attributes such as moisture content and the presence of Cardanol. This lack of precision made the findings unreliable as a basis for definitive classification.

The tribunal noted that the appellant was not provided with adequate opportunity to cross-examine CEPCI representatives and identified gaps in customs procedures, such as unclear sampling methods and inadequate sharing of documentation.

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Therefore, the tribunal remanded the matter back to the Original Adjudicating Authority to reassess the evidence with specific instructions. The tribunal emphasized that it did not make any definitive judgments on the merits of the case and the adjudicating authority must issue a new order after a thorough reconsideration.

To Read the full text of the Order CLICK HERE

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