" 1 Appeal No. C/30310/2021 CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL HYDERABAD REGIONAL BENCH - COURT NO. – I Customs Appeal No. 30310 of 2021 (Arising out of Order-in-Appeal No.VIZ-CUSTM-000-APP-072-20-21 dated 11.09.2020 passed by Commissioner of Customs & Central Tax (Appeals), Visakhapatnam) M/s Olam Agro India Pvt Ltd., .. APPELLANT Marupalli Mandal, Gajapathinagaram, Vizianagaram, Andhra Pradesh – 535 070. VERSUS Commissioner of Customs .. RESPONDENT Guntur P.B.No. 331, C.R.Building, Kannavari Thota, Guntur, Andhra Pradesh – 522 004. APPEARANCE: Shri Sandeep Garg & Ms Medini Agarwal, CAs for the Appellant. Shri A Rangadham, AR for the Respondent. CORAM: HON’BLE Mr. R.MURALIDHAR, MEMBER (JUDICIAL) HON’BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) FINAL ORDER No. A/30380/2024 Date of Hearing:28.08.2024 Date of Decision:16.10.2024 [ORDER PER: A.K. JYOTISHI] The issue, in brief, is that M/s Olam Agro India Pvt Ltd., (hereinafter referred to as appellant) had imported 3,88,962 Kgs of “Roasted Cashew Kernel” (Pieces) under 20 Bills of Entry classifying them under Customs Tariff Item 20081910 and thereby claiming Basic Customs Duty exemption under Customs Notification No. 96/2008-CUS dated 13.08.2008. Since, the Customs Officers had some doubt about the classification, the Bills of Entry were provisionally assessed pending Test Report as the Department felt that the impugned goods were “Raw Cashew Kernel broken (Shelled)”, which appropriately would fall under Customs Tariff item 08013210 and attract 2 Appeal No. C/30310/2021 Basic Customs Duty @ 30% (effective rate of duty Rs. 60 per kg or 45%, whichever is higher) as well as it would also attracts SW @ 10% and IGST @ 5%. The total differential duty involved on account of this dispute is Rs. 8,80,16,855/-. 2. Based on Test Reports, the Adjudicating Authority ordered finalisation of assessment holding the impugned goods as raw cashew kernel pieces with appropriate classification under Heading 08013210 and also ordered for recovery of differential duty of Rs. 8,80,16,885/- as a consequence to final assessment along with applicable interest. 3. The appellants, thereafter went in appeal before Commissioner (Appeals) on various grounds including non-reliability of Test Report of CEPCI Laboratory and Research Institute (CEPCI), whose test reports were relied upon by the Original Authority for arriving at the classification of the impugned goods. They also, interalia, took the ground that they were not provided with the opportunity for cross-examination of Authorised Representative of Laboratory for the reports having number 1435 and 1436, 1473-83 and 1503-09 dated 07.05.2019, 10.05.2019 and 10.05.2019 respectively. They also pointed out that the duplicate copies of 11 out of 20 reports were also not provided by respondents, despite request being made in writing. Therefore, impugned order has been passed against them in violation of the principles of natural justice. 4. The Commissioner (Appeals), vide his Order-in-Appeal dated 11.09.2020 (impugned order), interalia, agreed with the conclusions drawn by the Original Authority that they were classifiable under heading 08013210. He has mainly relied on the fact that there is no sufficient ground to negate the test report of CEPCI, which has conclusively held the impugned goods as “plain raw cashew kernel”. In the impugned order, the Commissioner 3 Appeal No. C/30310/2021 (Appeals) has also tried to analyse the term “roasted” as per common parlance test in the absence of any definition provided in the Statute. His argument is captured in para 5.7 and 5.8 of impugned order, which is reproduced below for ease of reference: 5.7 Even the common understanding is that ‘roasted cashew’, ‘salted cashew’ or ‘roasted an salted cashew’ are mainly used for direct human consumption. No, further process is carried out. Where as in this case, even as per the importer, the impugned goods were mildly roasted. The goods were supplied to Hindustan Unilever, Cadbury India and Britania, who in turn use them in the biscuits, cookies and other similar products manufactured by them. In the biscuit manufacturing process, the impugned broken cashew pieces get roasted to gain their full flavour & taste and to get rid of some sort of itchiness that is present in a raw cashew or mildly roasted cashew. The appellants has not produced even one evidence whether the impugned imported goods were supplied as it is as roasted cashew, meant for direct human consumption. 5.8 Therefore ‘roasted’ word in the Tariff Heading needs to be understood, in the absence of a definition provided in the statute, as per common parlance list. As discussed hereinbefore, the common understanding of roasted or salted cashew is which is ready for human consumption, as it is, as roasted cashew/salted cashew. Therefore, even as per common parlance test, the impugned goods are to be considered only as raw cashew, no matter even they are mildly roasted, as they were meant to be used as ingredients by the Hindustan Unilever, Cadbury India and Britannia in biscuit manufacturing, during which process only, they get properly roasted for human consumption. Had the Appellant produced any evidence, that the impugned broken cashew kernel, in the condition it was imported, was also used for direct human consumption as roasted cashew, notwithstanding the report given by the CEPCI Laboratory & Research Institute, there would be some force in their argument. In fine, I tend to concur with the findings of the Adjudicating Authority. The report, given by a testing laboratory accredited by NABL, notified by the FSSAI and fully funded by the Government of India, cannot be brushed aside, only for the reason the appellant is sceptical of some bias, unless compelling counter evidence is available. The Order-in-Original therefore merits to be upheld. The Commissioner (Appeals), in Para 5.6 also dealt with the request of the appellant regarding choice of Test Lab and observed that since there was no response from FSSAI, New Delhi and Food Testing Laboratory, JNTU, Kakinada on the reference made by the Department, samples were forwarded to the CEPCI Laboratory & Research Institute, Kollam, for analysis. 4 Appeal No. C/30310/2021 5. The Learned Advocate for the appellant has mainly argued that meaning of roasting or level of roasting to classify the product, either under Chapter 8 or under Chapter 20, has not been defined anywhere and also submits that when the valid certificate of origin describes the impugned goods as roasted cashew falling under CTH 2008, it has to be given the same meaning by the Customs also, if the veracity of the certificate of origin itself is not doubted. They have also relied on the purchase orders received from the Indian Buyers namely Hindustan Unilever, Cadbury India and Britannia indicating specification details for nuts and in support that when the impugned goods would fit into their specification, which has not been disputed and when the consignments have been accepted by the said buyers, this would corroborate the fact that impugned goods were “roasted nuts”. They have also challenged the testing reports itself on technical grounds. For example, he submits that the moisture content of raw cashew can vary upto 3.5% and of roasted nuts moisture content upto 2.7% and therefore content of moisture in cashew can differ based on sample selected for testing and that there is no standard range prescribed by the Government for the testing and differentiating between the roasted cashew and raw cashew on grounds of moisture. Moreover, they have doubted the test parameters, Test method specifications etc., adopted by CEPCI. Further, according to him, as per the Advance Journal of Food Sciences and Technology research conducted by Centre of Science and Education, the moisture content shall be 3% to 4% in the dry roasted cashew. However, in their case, the CEPCI has concluded that moisture content was found to be more than 2.5% and if the sample is roasted, the moisture content should be normally below 2.5%. They have also relied on certain other reports and technical parameters adopted worldwide to support their argument that the cashew exported by Mozambique Company is roasted cashew. He also points out that there is a 5 Appeal No. C/30310/2021 variance in the criteria related to moisture content in roasted cashew adopted by CEPCI and the one reported in Advance Journal of Food Science and Technology. In essence, they have pointed out to various ambiguities and inconsistencies in the report of CEPCI relied by the Department to arrive at their conclusion about its classification under Chapter 08013210. Therefore, the Learned Advocate has submitted that the entire case is based on the report which itself is vague and ambiguous and cannot become the sole criteria for arriving at the classification without considering the relevant facts including various other international parameters, certificate of origin reports, buyer’s purchase order etc. 6. On the other hand, Learned AR on behalf of the Department reiterated the grounds for confirmation of demand by the Adjudicating Authority and upheld by the Commissioner (Appeals). 7. Learned CA and Authorised Representative of the appellant by way of additional submissions dated 11.09.2024 has further submitted that the Adjudicating Authority has not considered some of their requests in the course of adjudication. She has specifically highlighted that CEPCI report was not shared with the appellant before issuance of show cause notice thereby depriving them with liberty to get the report cross checked through any other designated agency. Further, the appellant requests for cross examination of report was also ignored and the basis for classification was adopted by the Department was only the CEPCI report which according to him suffers from various inconsistencies. She has point out that CEPCI is neither recognised body to classify the product under CTA nor has the prescribed parameter to test the product and there are many ambiguities in their own report. By way of example, it was point out that CEPCI has taken different stands in respect of Report No. 6579 dated 02.11.2018 and Report dated 07.05.2019 and 6 Appeal No. C/30310/2021 10.05.2019 while in the report no. 6579 the moisture content in roasted cashew as per CEPCI has been shown as 3% whereas in the report dated 07.05.2019 and 10.05.2019 and it has been shown as 2.50%. Further, even the specification for moisture content in roasted cashew as per CEPCI specification if Cashew Kernels, posted on their portal is 5%. Thus, its advertant premises show that they are adjudicating subjective parameters as regards moisture content to distinguish between dried and roasted cashew. They have also relied on certain authoritative International parameters to highlight that CEPCI has not followed standard norms for coming to their conclusion about their product being raw cashew and not mild dry roasted. She has highlighted the fact that product is mild dried roasted, which is a process much more than “moderate heat treatment”. Therefore, in terms of tariff under the products will fall outside the scope of Chapter 8. 8. She has also pointed out that some of the relevant facts like method of roasting process provided by Mozambique certificate of origin, purchase order received for Indian buyers, possibility of different moisture content based on sample selection etc., have also not done, duly examined or considered by the Adjudicating Authority. She has essentially contested the stand taken by the CEPCI in their report that moisture content normally should be less than 2.5% if the sample is roasted. Whereas, there are many authoritative research papers and norms which has noted that moisture content shall be 3% to 4% in dry roasted cashews. 9. Heard both the sides. 10. The core issue to be decided in this matter is whether the impugned goods are falling under Heading 08013210 or under Heading 20081910. As per Chapter Note 3 of Chapter 8, the products like dry fruit or dry nuts may be partially rehydrated or treated for certain purposes including for the 7 Appeal No. C/30310/2021 purpose of additional preservations or stabilisation (for example by moderate heat treatment etc.,) provided that they retain the character of dry fruits or dry nuts. For the ease of reference, Chapter Note 3 is reproduced below: 3. Dried fruit or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes: (a) for additional preservation or stabilisation (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate), (b) To improve or maintain their appearance (for example, by the addition of vegetable oil or small quantities of glucose syrup), Provided that they retain the character of dried fruit or dried nuts. 11. On the other hand, Chapter 20 does not, interalia, include roasted fruits or nuts prepared or preserved by the processes specified in Chapter 7, 8, 11. Therefore, a conjoint reading of the Chapter 8 and Chapter 20 would indicate that certain products including nuts if they are prepared or preserved by the processes and to the extent specified in Chapter 8, it would not get covered under Chapter 20. However, if any process goes beyond this, it would go to Chapter 20. In the present case, there is provision for additional preservation or sterilization of dry fruits or dry nuts as well as for meeting or maintaining their appearance as long as they retain the character of dry fruits or dry nuts. In other words, as long as the dry nuts retain their original character as dry nuts, subjecting it to certain activities for additional preservation or sterilization or for improving or maintaining their appearance etc., like moderate heat treatment would not make them liable to be classified under Chapter 20. Further, it is noted that by way of example, certain processes have been indicated in the Chapter Note 3 of Chapter 8 like moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate, additional of vegetable oil or smaller quantities of glucose syrup. Therefore, as long as, these processes have been undertaken for additional preservation or sterilization or for improvement of appearance etc., it would still not be liable for classification under Chapter 20. In this case, the Department, on 8 Appeal No. C/30310/2021 the basis of test report, is saying that processes, which has been claimed to have been undertaken by the importer with respect to impugned goods, are not beyond the scope of the processes covered under Chapter Note 3 of Chapter 8 and that the impugned goods have a character of dried nuts and therefore Chapter 20 is ruled out. In other words, Department is alleging that impugned goods were only subjected to moderate heat treatment and that such treatment has not altered the character of dried fruit or nuts, whereas appellants are claiming that it was suspected dry roasting and has attained the characteristic roasted nuts and therefore beyond the scope pf processes envisaged in Chapter 8. 12. The Original Authority has, relied heavily on report of CEPCI. The content of the said analysis report based on which impugned goods were held as plain/raw cashew kernels, is reproduced, as under, for ease of reference: “i) If the sample is roasted, the moisture content is normally below 2.5% and all the samples are found to be having moisture more than 2.5%. ii) Cardanol is present in the sample. If the sample is roasted only traces of Cardanol may be noticed. iii) Organoleptic evaluation of the sample shows that taste and smell are not characteristic and gives an itching sensation. In the roasted cashew, this will not be normally observed and shall be free from flavour. iv) Colour is not uniform and most of the sampled pieces are in pale ivory colour. If the sample is roasted, uniform golden hue is observed. 9 Appeal No. C/30310/2021 v) Cross sectional examination shows both inside and cut pieces have characteristic colour of plain cashew.” 13. The Original Authority has dealt extensively with various objections taken by the appellant with regard to the test report, per se, and the various parameters followed by CEPCI for coming to the conclusion that impugned goods would be classifiable under Chapter 8. He has mainly said that the appellants have tried to negate the test report issued by reputed agency without any solid argument/documentary support. Therefore, in essence, documents and submissions made by appellants to prove that the report in question cannot be the sole criteria for deciding the classification has not been accepted by the Original Authority. He has also ruled out the reliance placed on the analysis certificate issued from their overseas supplier on account of their being related parties and holding that it appears to be in the nature of self certification. 14. Therefore, essentially, in this case, the entire classification is based on the test report of CEPCI. Admittedly, there is no standard parameters for distinguishing between raw cashew or roasted cashew nor there is any definitive definition for terms like dry roasted, moderate heat treatment etc., in the statute. Therefore, the inference has to be drawn based on the technical parameters given by the test laboratory and of experts, which in this case is CEPCI. Moreover, the norms adopted by CEPCI cannot be considered as Sacrosanct in the absence of any notified parameters by the Government of India for such goods and especially in the face of various other available parameters in terms of international bench marks, testing reports, studies etc. Therefore, the issue needs to be examined in detail. Though the Original Authority has tried to counter all the arguments given by the appellants for negating the test reports, still it leaves much scope for doubt in applying the said test report, ipso facto, for arriving at definitive 10 Appeal No. C/30310/2021 conclusion of its classification, without establishing the veracity and adoptability of said Test Report beyond reasonable doubt. 15. In test reports, CEPCI has also qualified some observations with “normally” and “may” etc., and adopted different parameters for their own reports as claimed by appellants. Further, in this case, it is not known as to what was the method adopted for drawal of sample therein drawn by Customs, whether it was as per the customs procedures prescribed under the Customs Manual or otherwise. It is also not clear, whether the sample was drawn in the presence of Authorised Representative of the appellant or otherwise. It is however, noted that as per FSSAI Circular notifying various NABL accredited food testing laboratories created for the purpose of carrying out analysis of samples taken under Section 47 of the Food Safety and Standards Act, 2006, at serial no. 170, CEPCI is one of the accredited laboratories. However, it is not known whether the samples have been drawn under provision of Section 47 of the FASAI Act, which provides for detailed procedure for drawal and testing of food sample. Therefore, it appears that the appellants never got any opportunity to rebut the claims made and conclusion drawn with respect to their impugned goods in the Test Reports before issue of the show cause notice. They never got any chance to seek re- testing etc., as would be admissible in accordance with procedure under Customs Manual. Therefore, there is definite lack of opportunity for rebutting and contesting the test report, per se, before the finalisation of Order-in- Original vide which all the Bills of Entry were finalised. It is also noted that the appellant has also in their grounds of appeal mentioned that the opportunity of cross examination has not been provided for the reports having nos. 1435 and 1436, 1473-83 and 1503-09 dated 07.05.2019, 10.05.2019 and 10.05.2019 issued by CEPCI. Letter dated 24.07.2019 requesting for cross examine of the Authorised Signatory of CEPCI has also 11 Appeal No. C/30310/2021 been ignored by the Department. They have also not been provided with the duplicate copy of 11 out of 25 test reports despite asking for the same. 16. We have perused the Order-in-Original and it is noted that there is no reference to the letter dated 24.07.2019 in the said order of the Original Authority though there is a reference to letter dated 04.09.2019 whereby the appellant had asked for copies of the test report in respect of 11 consignments. No observations have been made by the Adjudicating Authority as to whether it was provided or not required to be provided. What is also observed that while the appellants have given various submissions for negating the parameters adopted by CEPCI, as also relevant documents like certification by M/s Intertek, a global and reputed quality assurance certification agency etc., the procedure for “mild dry roasting” adopted by appellant and certified by M/s Intertek has not been examined in detail. Adjudicating Authority has also not examined whether “dry roasting” method of roasting is same as “moderate heat treatment” or otherwise in view of appellant’s submissions in this regard. Further, specifications given by their buyer, which clearly places order for ‘Roasted Cashew’, nuts with moisture content of Max 5% and of plain ivory white colors has not been duly examined and considered. Original Authority has dealt with these defence in para 5.1 to 5.3 of Order-in-Original but it has not been effectively dealt with in the absence of any opportunity to the appellant to cross examine the authorised representative of CEPCI as also the fact that appellant never got chance to ask for Re-Test or question the method or parameters adopted by CEPCI. It is also interesting to note that as per scope of accredition for CEPCI, different test methods and parameters and specifications are available for dried roasted cashew, deep roasted cashew etc. Also Purchase Order of Unilever provides for tolerance of moisture in respect of dark roast (5%), deep roast (2%) etc. Thus, it is obvious that they would have rejected if the 12 Appeal No. C/30310/2021 ‘roasted cashew’ did not confirm to such tolerance. Admittedly, no such rejection has been brought on record. It is also an admitted position that impugned nuts were not subjected to any further processes by the appellant before supplying to their buyer. 17. Therefore, in the facts of the case, what was desirable for the sake of natural justice was that request for copies of all test reports should have been provided and cross examination of CEPCI should have been allowed, more so, when that is the main basis for denying the classification clause by the appellant. Similarly, in view of some of the documents like certificate of origin, Test Report of reputed testing organisation for impugned goods, purchaser’s specifications, etc., the onus is on Revenue to establish claimed classification if there is any grey area open to divergent interpretation. 18. In view of discussions in the foregoing paras, the impugned order is set aside and the matter is remanded back to Original Adjudicating Authority with the direction to give them opportunity for cross examination of CEPCI representatives as also provide copies of documents not already provided. We are also making it clear that, we have not made any observation on the merits of the case and the Adjudicating Authority is free to examine all the relevant aspects and pass a proper order after considering all the relevant details, evidence etc., and following the principles of natural justice. 19. Appeal allowed by way of remand. (Order Pronounced in open court on 16.10.2024) (R. MURALIDHAR) MEMBER (JUDICIAL) (A.K. JYOTISHI) MEMBER (TECHNICAL) jaya "