2022 (4) TMI 1496 - AAR - Customs

Classification of goods - tyre pyrolysis oil - tyre pyrolysis recovered carbon, along with their treatment on import under ISFTA - whether these products are covered under the negative list of the India-Sri Lanka Free Trade Agreement (ISFTA)? - whether the impugned goods are allowed for free trade with exempted customs duty? - HELD THAT - It has been explained that tyre pyrolysis is the industrial process of breaking down large molecules of the used/ELT tyre into smaller molecules of oil, gas and carbon black. The waste tyre pyrolysis process yields a gaseous fraction of mainly non-condensable gases, an oily fraction mainly composed of organic substances, and a solid fraction that comprises mainly carbon, metal, and other inert material. The composition of the primary pyrolysis products is influenced by process operating parameters such as the feed size, temperature and pressure, residence time, heating rate, and reactor configuration. The fuel characteristics of the tyre oil show that it is similar to gas oil or light fuel oil. The TPO is not specifically mentioned in any of the tariff entries. Therefore, the item needs to be classified on the basis of physical, chemical and functional characteristics. There is no standardisation of TPO, as the properties of the TPO depend upon feedstock and process parameters. Therefore, in the present case, an appropriate classification entry would have to be based on the submissions made by the applicant. The item under consideration can be classified either as biodiesel under Heading 3826 since it is derived from the rubber part of a tyre or alternatively, it can be classified as mineral fuel under Chapter 27 - TPO is obtained from the pyrolysis process as compared to the process of transesterification followed to obtain biodiesel. Further, the source material for manufacturing biodiesel can be vegetable oils, animal fats or used oils or fats. The source material for TPO is the end of life tyre. Based on the above-mentioned differences, TPO does not appear to merit classification as biodiesel under Heading 3826. TPO is not obtained from crude. In the pyrolysis of the tyre, the polymers are cracked to obtain hydrocarbon oil. Pyrolysis is also referred to as cracking, which is one of the processes to obtain oils mentioned in Heading 2710. Accordingly, the TPO under consideration is classifiable under Heading 2710. Fuel specified in tariff entries of Heading 2710, in general, has to satisfy a particular BIS standard associated with the item. As mentioned earlier, the TPO is not a standardised oil and its characteristics depend upon the feedstock and process variables. Therefore, the item merits classification under residual sub-heading 2710 19 90 as the oil, other than crude oil, and not being a waste oil or biodiesel, having utility as industrial liquid fuel oil in burners and other heat applications such as reactors, boilers, heat furnaces, etc. Recovered carbon black - HELD THAT - HSN notes exclude natural carbons in the form of solid fuels (anthracite, coal, lignite) of Chapter 27 from Heading 2803. Solid fuels manufactured from coal are covered under sub-heading 2701 20. The source material for the solid fuel mentioned in sub-heading 2701 20 is natural coal. However, the carbon black recovered from tyre pyrolysis is not a natural carbon in the form of solid fuel. It is obtained as a result of the incomplete combustion of a hydrocarbon present in the used/ELT tyres. Therefore, recovered carbon black is not classifiable under sub-heading 2701 20. Accordingly, the carbon black under consideration is not excluded from Heading 2803. Therefore, recovered carbon black merits classification under sub-heading 2803 00 10. Free trade of both goods - HELD THAT - It needs to be examined whether the subject matter comes within the purview of advance rulings in customs. Section 28H of the Customs Act, 1962 lists the issues on which advance rulings can be sought. The issue of free trade having no bearing on duty rate is not included in Sec. 28H. Therefore, ruling on this particular issue cannot be pronounced, as the question is beyond the scope of advance rulings. The tyre pyrolysis oil and recovered carbon black merit classification under sub-headings 2710 19 90 and 2803 00 10 respectively, of the first schedule of the Customs Tariff Act, 1975. These items are not covered under the negative fist of ISFTA. The goods are exempted from basic customs duty under ISFTA - On the issue of free trade (importability) from Sri Lanka, no advance ruling is being pronounced.

Summary

Issues Involved:
1. Classification of Tyre Pyrolysis Oil (TPO) and Recovered Carbon Black.
2. Inclusion of TPO and Recovered Carbon Black in the negative list of the India-Sri Lanka Free Trade Agreement (ISFTA).
3. Exemption from customs duty and free trade status of TPO and Recovered Carbon Black.

Issue-wise Detailed Analysis:

1. Classification of Tyre Pyrolysis Oil (TPO) and Recovered Carbon Black:

The applicant, M/s. Pairan Pyrolysis Pvt. Ltd., sought advance rulings on the classification of TPO and recovered carbon black. The TPO is a dark, viscous liquid with high density, high viscosity, and high calorific value, used predominantly as industrial liquid fuel oil. The recovered carbon black is used as solid industrial fuel in cement kilns.

The ruling determined that TPO does not fit under Heading 3826 as biodiesel due to differences in the production process and source material. Instead, TPO is classified under Heading 2710, which covers oils obtained by processes such as cracking. Specifically, TPO is classified under sub-heading 2710 19 90 as it is an oil other than crude oil, used as industrial liquid fuel oil.

For recovered carbon black, the ruling noted it is a finely divided form of amorphous carbon, obtained through pyrolysis, and not a natural carbon in the form of solid fuel. Therefore, it merits classification under sub-heading 2803 00 10, which covers carbon black.

2. Inclusion in the Negative List of ISFTA:

The ruling referred to Annex 2 of the ISFTA, which contains India's negative list. It was determined that items under sub-headings 2710 19 90 (TPO) and 2803 00 10 (recovered carbon black) are not included in India's negative list under the ISFTA.

3. Exemption from Customs Duty and Free Trade Status:

Regarding customs duty exemption, Notification No. 26/2000-Cus., dated 1-3-2000, specifies that both TPO and recovered carbon black are exempted from basic customs duty under ISFTA, subject to the conditions specified in the notification and other applicable laws.

However, the issue of free trade (importability) was deemed beyond the scope of advance rulings as per Section 28H of the Customs Act, 1962, which lists the issues on which advance rulings can be sought. Therefore, no ruling was pronounced on the free trade status.

Conclusion:

The ruling classified TPO under sub-heading 2710 19 90 and recovered carbon black under sub-heading 2803 00 10. Both items are not in the negative list of ISFTA and are exempted from basic customs duty under ISFTA. No advance ruling was provided on the free trade status of the goods.