Case Law Details
In re Kodarma Chemical Private Limited (CAAR Delhi)
M/s. Kodarma Chemical Private Limited, a company specializing in the extraction of aromatic hydrocarbons like benzene, toluene, and mixed xylenes, sought an advance ruling on the classification of Pyrolysis Gasoline (Pygas) under the Customs Tariff Act, 1975. The applicant proposed that Pygas, which contains a higher proportion of aromatic hydrocarbons than non-aromatic ones, should be classified under Chapter 2707, which covers aromatic hydrocarbons. The goods in question are derived from the distillation of petroleum or coal tar products, with a Certificate of Analysis showing that Pygas contains substances like benzene, toluene, and xylene. The applicant also noted that the distillation range of Pygas does not meet the criteria for light oils under Chapter 2710, which deals with petroleum oils, as its final boiling point is lower than 210°C, and aromatic hydrocarbons exceed non-aromatic ones by weight.
The Customs Authority reviewed the classification criteria for both Chapters 2707 and 2710. It found that the applicant’s classification under Chapter 2707 was correct, given the aromatic content exceeding non-aromatic hydrocarbons. However, potential changes in the properties of the goods, such as alterations in aromatic content or distillation characteristics, could lead to a reclassification. If the aromatic hydrocarbons were removed or reduced, or if the boiling point changed, Pygas could be classified under Chapter 2710 or even other relevant chapters for derived products. The ruling affirmed that, based on current properties, Pygas should be classified under Chapter 2707, sub-heading 2707 99 00 for other aromatic hydrocarbons. Nevertheless, the classification may need revisiting if the composition of the product changes in the future.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, DELHI
M/s. Kodarma Chemical Private Limited (hereinafter referred to as the “Applicant”) is a private limited company incorporated in the year 2008 under the Companies Act, 1956. That the applicant intends to import Pyrolysis Gasoline, also known as Pygas in trade parlance (“goods”) for use in their plant for extraction of aromatic items like benzene, toluene, mixed xylenes, etc. present therein.
1.1 That the goods offered to applicant, as per the Certificate of Analysis dated 26.01.2024 provided by one of the suppliers, namely, M/s. Long Son Petrochemicals Company Limited, Vietnam, would be comprising of benzene, toluene, xylene, styrene, etc. in varying percentages. In any case, percentage of total aromatics is
1.2 That the indicative distillation range, illustrated in the analysis report would be in the range of 67.6 degree C (Initial Boiling Point) to 181.6-degree C (Final Boiling Point). 90% distillation occurred at 154.6 degree C.
1.3 That thus, the goods to be imported is comprised of aromatic constituents in excess of non-aromatic constituents and final boiling point would be in the region of 200-degree C.
1.4 That Chapter 27 of the First Schedule to Customs Tariff Act,1975 inter alia deals with Mineral Fuels, Mineral Oils and Products of their Distillation.
That as per Chapter Note 2-
“References in heading 2710 to “petroleum oils and oils obtained from bituminous minerals include not only petroleum oils and oils obtained from bituminous minerals but also similar oils, as well as those consisting mainly of mixed unsaturated hydrocarbons, obtained by any process, provided that the weight of the non-aromatic constituents exceeds that of the aromatic constituents.”
1.5 That as per Sub-heading Note 4-
“For the purposes of sub-headings of heading 2710 12, “light oils and preparations” are those of which 90% or more by volume (including losses) distil at 210 degree C according to the ISO 3405 method (equivalent to the ASTM D 86 method).
1.6 That Chapter Heading 2707 is as under:
2707 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents
2707 10 00 – Benzol (benzene)
2707 20 00 – Toluol (toluene)
2707 30 00 – Xylol (xylenes)
2707 40 00 – Naphthalene
2707 50 00 – Other aromatic hydrocarbon mixtures of which 65% or more by volume (including losses) distils at 250 degree C by the ISO 3405 method (equivalent to the ASTM D 86 method) Other:
2707 91 00 – Creosote oils
2707 99 00 – Other
1.7 That in the above factual matric, the applicant has interpreted classification of goods, i.e. Pyrolysis Gasoline. also known as Pygas, essentially containing aromatic constituents in excess of non-aromatic constituents, for consideration by this Hon’ble Authority for Advance Ruling.
1.8 The applicant has interpreted classification of goods, namely, Pyrolysis Gasoline @ Pygas within the scheme of classification under Chapter 27 of the First Schedule to Customs Tariff Act,1975, as under:
a) The scope of Chapter Heading 2710 covering “petroleum oils and oils obtained from bituminous minerals” is constricted by the proviso wherein it is stipulated that weight of the non-aromatic constituents exceeds that of the aromatic constituents.
b) Since the goods are comprising of aromatic constituents in excess of non-aromatic constituents, the same would not fall under Chapter Heading 2710. Moreover, the criteria of 90% or more (by volume) distillation at 210 degree C is also not satisfied. Consequently, the goods cannot be considered as Light oils and preparations of 2710 12.
1.9. Chapter Heading 2707 deals with products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents.
a) Sub-headings 2707 10 00 to 2707 40 00 and 2707 91 00 deals with specific items and thus, not applicable to the goods.
b) Sub-heading 2707 50 00 deals with other aromatic hydrocarbon mixtures in which 65% or more by volume (including losses) distils at 250 degree C by the ISO 3405 method (equivalent to the ASTM D 86 method) and thus, not applicable to the goods.
1.10 Sub-heading 2707 99 00 covered “others”, i.e. items in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents and which, as such, are not covered by headings 2707 10 00 to 2707 91 00.
1.11 Guided by the facts where the goods under consideration —
(i) contain more aromatic constituents (by weight) than non-aromatic constituents, and
(ii) final boiling point is less than 210/250 degree C,
Whether the applicant has correctly interpreted that the classification of the goods is Chapter sub-heading 2707 99 00 of the First Schedule to the Customs Tariff Act,1975.
Comments of the Port Commissionerate
2. Eligibility of the Applicant in terms of Section 28-E (c) of the Customs Act, 1962 to seek such advance ruling.
2.1 Based on the materials submitted, it appears that the applicant meet the general eligibility requirements as outlined under Section 28-E (c)
(i) of the Customs Act, 1962, i.e holding a valid Importer-Exporter code number granted under section 7 of the Foreign Trade (Development and Regulation Act). 1992 (22 of 1922). [IEC No. — 0208025430]
2.2. Applicability of Proviso (1) of Section 28-I (2) of the Customs Act, 1962 regarding the question raised in the application.
As per Proviso (1) of Section 28-I (2) of the Customs Act, 1962, the Authority will decide whether to accept or reject the application, but it cannot accept it if the same issue is already being considered elsewhere or has already been decided before any officer of customs, the Appellate Tribunal or any Court. In this regard, based on importer’s submission in FORM CAAR – 1, the classification of Pyrolysis Gasoline is not pending before any customs officer, Appellate Tribunal, or court in India. While there have been discussions and rulings related to similar products, such as Tyre Pyrolysis Oil. No specific cases concerning Pyrolysis Gasoline are currently known to be under consideration.
2.3. Specify whether the claim of the applicant regarding the nature of activity, i.e. it is ongoing/ proposed is correct.
The applicant has proposed to import Pyrolysis Gasoline, also known as Pygas for use in their plant for extraction of aromatic items like benzene, toluene, mixed xylenes, etc. present therein. The Certificate of Analysis indicates a higher concentration of aromatic constituents. In this regard, as mentioned already at point no. 1, the importer has an authorized IEC, and as per available records, it appears that there are no specific restrictions or prohibitions on the import of Pyrolysis Gasoline. Therefore, it appears that the claim of the applicant regarding the nature of activity i.e. ‘Import proposed’ may be correct subject to proper license/ authorization from DGFT and other applicable compliances.
2.4. Comments on the merit of the question raised in application, along with all materials in support thereof.
The application filed by M/s Kodarma Chemical Private Limited concerns the classification of Pyrolysis Gasoline (Pygas) under the Customs Tariff Act, 1975, specifically whether it should be classified under Chapter 2707 (aromatic hydrocarbons) or Chapter 2710 (petroleum oils).The applicant has provided relevant facts, including a Certificate of Analysis and distillation data, which suggest that Pygas contains a higher proportion of aromatic hydrocarbons than non-aromatic hydrocarbons. Based on these facts, the applicant argues that Pygas should be classified under Chapter 2707. However, it is important to note that the classification of goods can be subject to change depending on their properties and processing methods. The following analysis considers both the applicant’s interpretation and potential issues related to changes in the properties of the product, which could lead to a different classification.
2.5. Classification Under Chapter 2707:
Chapter 2707 deals with products derived from the distillation of high-temperature coal tar, including aromatic hydrocarbons such as benzene, toluene, xylenes, naphthalene, and creosote oils. The applicant has pointed out that Pygas contains aromatic hydrocarbons like benzene, toluene, and xylenes, which are typically classified under 2707. Furthermore, the Certificate of Analysis and the distillation range (67.6°C to 181.6°C, with 90% distillation at 154.6°C) support the classification of Pygas under 2707 as it contains aromatic hydrocarbons in excess of non-aromatic hydrocarbons. However, it is crucial to note that Pygas could be subject to reclassification if its properties change, particularly with respect to the aromatic content or distillation characteristics. If the proportion of aromatic hydrocarbons decreases (e.g., due to further refining or separation processes), Pygas may no longer meet the criteria for Chapter 2707. Similarly, if Pygas undergoes a distillation process that alters its boiling point range (e.g., if the final boiling point increases significantly), the product may no longer qualify for classification under 2707 and could potentially be reclassified under Chapter 2710 (petroleum oils) or another appropriate heading.
2.6. Classification Under Chapter 2710:
Chapter 2710 deals with petroleum oils and oils obtained from bituminous minerals, and the heading specifically requires that the weight of non-aromatic hydrocarbons exceeds that of the aromatic hydrocarbons. Since Pygas contains a higher proportion of aromatic hydrocarbons, it does not meet the criteria for classification under 2710. Furthermore, Sub-heading Note 4 under Chapter 2710 specifies that light oils must distill 90% or more by volume at 210°C, which Pygas does not meet (as its final boiling point is approximately 181.6°C, with 90% distilling at 154.6°C). Therefore, the applicant’s interpretation that Pygas does not qualify as light oils under 2710 12 appears correct. However, if the properties of Pygas change (e.g., if it undergoes further refining or distillation), the product could potentially shift from Chapter 2707 to Chapter 2710. For instance, if the aromatic hydrocarbons in Pygas are removed or reduced to a level where non-aromatic hydrocarbons become predominant, the product might then qualify for classification under 2710, as it would meet the requirement of having non- aromatic hydrocarbons in excess.
2.7. Further Considerations for Classification:
Based on the analysis provided by the applicant, the following points support the classification of Pygas under Chapter 2707:
i. Aromatic Hydrocarbon Content: The applicant has demonstrated that Pygas is primarily composed of aromatic hydrocarbons, which justifies its classification under 2707. However, if the aromatic content were to decrease due to further processing (e.g., distillation or separation), it could no longer qualify for 2707 and might need to be reclassified.
ii. Distillation Characteristics: The distillation range provided in the Certificate of Analysis suggests that Pygas does not meet the requirements for light oils under 2710. However, if Pygas undergoes additional refining or distillation, altering its distillation profile, it could potentially meet the criteria for light oils under 2710 12.
iii. Final Boiling Point: The final boiling point of Pygas is less than 250°C, which supports its classification under 2707. If this property were to change due to further processing, the classification could shift.
2.8. Potential changes in properties and impact on classification:
The classification of Pygas under Chapter 2707 is based on its current properties, such as the higher proportion of aromatic hydrocarbons and the distillation range. However, if the properties of Pygas change, particularly through refining, distillation, or chemical processing, the classification could be impacted:
i. Reduction in Aromatic Hydrocarbons: If the aromatic hydrocarbons are reduced (e.g., through hydrotreating or cracking), the product might no longer meet the criteria for 2707 and could be classified under 2710 (petroleum oils) or another appropriate heading.
ii. Change in Distillation Characteristics: If the distillation profile of Pygas is altered (e.g., if the boiling point increases), the product could qualify as light oils under 2710 12, shifting its classification.
iii. Chemical frirocessing : If Pygas is chemically processed into derivatives like styrene or polystyrene, it could be reclassified under Chapter 29 (organic chemicals) or Chapter 39 (plastics), depending on the end product.
Therefore, it appears that the applicant has made a reasonable case for the classification of Pygas under CTH 2707, specifically under CTI 2707 99 00 for other aromatic hydrocarbon mixtures. However, it is important to recognize that the classification of Pygas could change if its properties undergo significant alteration. If the aromatic content decreases or the distillation profile changes, the product may no longer qualify for classification under 2707 and could potentially be reclassified under 2710 or another appropriate heading. Therefore, the classification of Pygas appears correct based on its current properties, but any future changes in its composition or distillation characteristics could lead to a different classification.
2.9. Whether the question raised is pending before any officer of Customs, the Appellate Tribunal or any Court.
As mentioned in Point No. 2 above, it appears that as per importer submission in FORM CAAR — 1, there is no information indicating that the classification of Pyrolysis Gasoline is pending before any customs officer, Appellate Tribunal, or court in India.
Personal Hearing
3. The Personal hearing in the matter was conducted on 07.01.2025 wherein the authorized representative of the applicant attended the same and reiterated the same which were already submitted with the application of the applicant.
Analysis and Conclusion
4.1 The application filed by M/s Kodarma Chemical Private Limited concerns the classification of Pyrolysis Gasoline (Pygas) under the Customs Tariff Act, 1975, specifically whether it should be classified under Chapter 2707 (aromatic hydrocarbons) or Chapter 2710 (petroleum oils).This goods is used in their plant for extraction of aromatic items like benzene, toluene, mixed xylenes, etc. present therein. That the goods offered to applicant, as per the Certificate of Analysis dated 26.01.2024 provided by one of the suppliers, namely, M/s. Long Son Petrochemicals Company Limited, Vietnam, would be comprising of benzene, toluene, xylene, styrene, etc. in varying percentages. In any case, percentage of total aromatics is higher than non-aromatics. That the indicative distillation range, illustrated in the analysis report would be in the range of 67.6 degree C (Initial Boiling Point) to 181.6-degree C (Final Boiling Point). 90% distillation occurred at 154.6 degree C. That thus, the goods to be imported is comprised of aromatic constituents in excess of non-aromatic constituents and final boiling point would be in the region of 200-degree C.
4.2 That Chapter 27 of the First Schedule to Customs Tariff Act,1975 inter alia deals with Mineral Fuels, Mineral Oils and Products of their Distillation. That as per Chapter Note 2-
“References in heading 2710 to “petroleum oils and oils obtained from bituminous minerals include not only petroleum oils and oils obtained from bituminous minerals but also similar oils, as well as those consisting mainly of mixed unsaturated hydrocarbons, obtained by any process, provided that the weight of the non-aromatic constituents exceeds that of the aromatic constituents.”
4.2.1 That as per Sub-heading Note 4-
“For the purposes of sub-headings of heading 2710 12, “light oils and preparations” are those of which 90% or more by volume (including losses) distil at 210 degree C according to the ISO 3405 method (equivalent to the ASTM D 86 method).
4.2.2 That Chapter Heading 2707 is as under:
2707 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents
2707 10 00- Benzol (benzene)
2707 20 00 – Toluol (toluene)
2707 30 00 – Xylol (xylenes)
2707 40 00 Naphthalene
2707 50 00 Other aromatic hydrocarbon mixtures of which 65% or more by volume (including losses) distils at 250 degree C by the ISO 3405 method (equivalent to the ASTM D 86 method) Other:
2707 91 00 – Creosote oils
2707 99 00 – Other
4.3 That in the above factual matric, the applicant has interpreted classification of goods, i.e. Pyrolysis Gasoline, also known as Pygas, essentially containing aromatic constituents in excess of non-aromatic constituents, for consideration by this Authority. The applicant has interpreted classification of goods, namely, Pyrolysis Gasoline @ Pygas within the scheme of classification under Chapter 27 of the First Schedule to Customs Tariff Act,1975, as under:
a) The scope of Chapter Heading 2710 covering “petroleum oils and oils obtained from bituminous minerals” is constricted by the proviso wherein it is stipulated that weight of the non-aromatic constituents exceeds that of the aromatic constituents.
b) Since the goods are comprising of aromatic constituents in excess of non-aromatic constituents, the same would not fall under Chapter Heading 2710. Moreover, the criteria of 90% or more (by volume) distillation at 210 degree C is also not satisfied. Consequently, the goods cannot be considered as Light oils and preparations of 2710 12.
4.4 The Chapter Heading 2707 deals with products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents-
a) Sub-headings 2707 10 00 to 2707 40 00 and 2707 91 00 deals with specific items and thus, not applicable to the goods.
b) Sub-heading 2707 50 00 deals with other aromatic hydrocarbon mixtures in which 65% or more by volume (including losses) distils at 250 degree C by the ISO 3405 method (equivalent to the ASTM D 86 method) and thus, not applicable to the goods.
4.4.1 Sub-heading 2707 99 00 covered “others”, i.e. items in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents and which, as such, are not covered by headings 2707 10 00 to 2707 91 00.
4.5 Based on the materials submitted7the Port has provided that the classification of Pyrolysis Gasoline is not pending before any customs officer, Appellate Tribunal, or court in India. The Certificate of Analysis indicates a higher concentration of aromatic constituents.
4.6 The applicant has appropriately classified the product under Chapter 2707, which deals with products derived from the distillation of high-temperature coal tar, including aromatic hydrocarbons such as benzene, toluene, xylenes, naphthalene, and creosote oils. The applicant has pointed out that Pygas contains aromatic hydrocarbons like benzene, toluene, and xylenes, which are typically classified under 2707. Furthermore, the Certificate of Analysis and the distillation range (67.6°C to 181.6°C, with 90% distillation at 154.6°C) support the classification of Pygas under 2707 as it contains aromatic hydrocarbons in excess of non-aromatic hydrocarbons. However, it is crucial to note that Pygas could be subject to reclassification if its properties change, particularly with respect to the aromatic content or distillation characteristics.
4.7 Whereas, the other competing head i.e. Chapter 2710 deals with petroleum oils and oils obtained from bituminous minerals, and the heading specifically requires that the weight of non-aromatic hydrocarbons exceeds that of the aromatic hydrocarbons. Since Pygas contains a higher proportion of aromatic hydrocarbons, it does not meet the criteria for classification under 2710. Furthermore, Sub-heading Note 4 under Chapter 2710 specifies that light oils must distill 90% or more by volume at 210°C, which Pygas does not meet (as its final boiling point is approximately 181.6°C, with 90% distilling at 154.6°C). Therefore, the applicant’s interpretation that Pygas does not qualify as light oils under 2710 12 appears correct.
4.8 Based on the analysis provided by the applicant, and also elaborated by the Port Commissionerate, the following points strongly support the classification of Pygas under Chapter 2707:
i. The applicant has demonstrated that Pygas is primarily composed of aromatic hydrocarbons, which justifies its classification under 2707. However, if the aromatic content were to decrease due to further processing (e.g., distillation or separation), it could no longer qualify for 2707 and might need to be reclassified.
ii. Distillation Characteristics: The distillation range provided in the Certificate of Analysis suggests that Pygas does not meet the requirements for light oils under 2710. However, if Pygas undergoes additional refining or distillation, altering its distillation profile, it could potentially meet the criteria for light oils under 2710 12.
iii. Final Boiling Point: The final boiling point of Pygas is less than 250°C, which supports its classification under 2707. If this property were to change due to further processing, the classification could shift.
5. In view of the aforesaid para, the applicant has correctly interpreted that the classification of the goods is Chapter sub-heading 2707 99 00 of the First Schedule to the Customs Tariff Act,1975.
6. I, rule accordingly.
