Case Law Details

Case Name : In re Sky Impex  (GST AAR Mumbai)
Appeal Number : Ruling No. CAAR/Mum/ARC/17/2021
Date of Judgement/Order : 02/07/2021
Related Assessment Year :

In re Sky Impex  (CAAR Mumbai)

Considering the mandate of the Chapter Note 5A, that, headings 4001 and 4002 do not apply to any rubber or mixture of rubbers which has been compounded, before or after coagulation, with vulcanising agents, accelerators, retarders or activators (other than those added for the preparation of pre-vulcanised rubber latex); pigments or other colouring matter, other than those added solely for the purpose of identification; plasticisers or extenders (except mineral oil in the case of oil-extended rubber), fillers, reinforcing agents, organic solvents or any other substances, except those permitted under (B); and the fact that from the product literature, it is clear that the product/s under consideration contain at least 20% and up to 40% of materials like silica, carbon black, natural ester wax, and a curative package which is a trade secret of the manufacturer, leads one to the conclusion that heading 40.02 is not an appropriate heading for the group of products sought to be imported. On the other hand, I am inclined to concur with the views of the Commissioner of Customs, Import – II, NCH, Mumbai that heading 40.05, meant specifically for compounded rubber, is a more appropriate choice. Even though, heading 40.05 doesn’t specifically mention synthetic rubber, placing reliance on Chapter Note 1, that the term rubber includes synthetic rubber, it appears to be the correct heading for rubber compounded with silica and carbon black.

In view of the aforementioned discussions, I rule those various grades of synthetic rubber, e.g., HR 62, HR 65, HR 81, HR 84, and HR 495 C, manufactured by Simon Industry Corporation, Taiwan and sought to be imported by the applicant merit classification under heading 40.05, and more specifically, under sub-heading 40051000 of the first schedule to the Customs Tariff Act, 1965.

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

M/s. Sky Impex has filed an application dated 06.04.2021, which was received on 15.04.2021, seeking an advance ruling on classification of FKM Synthetic rubber compounds which are in primary form and made of more than 60% of di-polymer of hexafluoropropylene and vinylidene fluoride (CAS No. 9011-17-0), less than 5 % of silica (CAS No. 7631-86-9), less than 15% of trade secret curative package, less than 40 % of carbon black (CAS No. 1333-86-4) and less than 2% of natural ester wax (CAS No. 8015-86-9). The applicant is of the contention that amongst the contending sub-headings of 40029910 or 40029920 or 40029990 or 40059910 or 40051020 or 40059990, the heading 40059910 appears to be more appropriate since the subject goods are compounded with silica or carbon black. Since, the composition of the ingredients as conveyed by the applicant were open ended, the applicant was requested to provide the ranges of each of the constituents in the final products. In reply, the applicant has stated that as per their supplier, M/s. Simon Industry Corporation, Taiwan, the product is high heat resistant rubber compound, and that FKM rubber doesn’t vulcanise with Sulphur and there are other vulcanising agents like Calcium Hydroxide/ Peroxide. As regards composition, they indicated the ranges of di-polymer of hexafluoropropylene and vinylidene fluoride to be in the range of 60-80%, silica in the range of 3-5%, trade secret curative package in the range of 10-15%, carbon black in the range of 6-40%, and natural ester wax in the range of 1-2%. It is also stated that different grades, e.g., HR 62, HR 65, HR 81, HR 84, and HR 495 C have slightly different composition to offer different types of high heat resistant rubber compound having different hardness, tensile strength, flow properties etc. to meet different specifications for different applications like moulding, extrusion, metal bonding etc.

2. The applicant declared that they wish to import the subject goods through the Mumbai port.

Therefore, the application was forwarded to the Commissioner of Customs, Import – H, NCH, Mumbai Customs Zone – I for comments. The comments of the Commissioner have been conveyed vide letter dated 22.06.2021. In the said communication, it is suggested that the sub-heading, 40051000 is more appropriate for the subject goods considering the fact that they appear to have been compounded. The comments of the Commissioner have been conveyed to the applicant. The applicant has communicated that they have nothing further to add.

3. The application was listed for hearing on 01.06.2021. The applicant was represented by S/Sri Kuldeep Singh Nara, advocate and Gautamkumar K. Jhunjhunwala, partner. During the hearing the nature and composition of the synthetic rubber compounds sought to be imported were reiterated and a request was made for an advance ruling so that the classification issue is settled.

4. According to the applicant, rubber is a broad term used to refer to many types of different polymers called as elastomers. Elastomers can be stretched and will return to their original shape. Natural rubber is the original and the first kind of rubber to be used. Other than natural rubber, all the other types of rubber are synthetic or man- made. Synthetic rubber is artificially made from petrochemical feed-stocks. Naphtha, derived from refining of crude oil is the principal raw material for different types of rubber in synthetic category. The naphtha is mixed with natural gas to create monomers such as styrene and isoprene, essential for synthetic rubber manufacture. There are about twenty different types of chemicals used for making different synthetic rubber varieties. Depending on the chemicals added and the properties associated with it, the synthetic rubber can be as hard as a bowling ball or as resilient as a rubber band or as soft as a sponge. Approximately 70% of all rubber used today are synthetic rubber varieties. Some of the popular synthetic rubber types include the following: –

  • Acrylic Rubber (ACM)
  • Butadiene Rubber (BR)
  • Butyl Rubber (IIR)
  • Chloro-sulfonated Polyethylene (CSM)/ Hypalon
  • Ethylene Propylene Diene Monomer (EPDM)
  • Fluoro-elastomers (FKM)/ Viton (FKM is a class of synthetic rubber designed for very high temperature operation. FKM provides extraordinary levels of resistance to chemicals, heat and oil, while providing useful service life around & above 200°C).
  • Isoprene Rubber (1R)
  • Nitrite Rubber (NBR)
  • Perfluoro-elastomer (FFKM)
  • Polychloroprene (CR)/ Neoprene
  • Polysulfide Rubber (PSR)
  • Silicone Rubber (SiR)
  • Styrene Butadiene Rubber (SBR)

The most prevalent synthetic rubber is styrene-butadiene rubbers (SBR) derived from the copolymerization of styrene and 1,3-butadiene. Other synthetic rubbers include polyisoprene, prepared by polymerization of synthetic Isoprene.

5. According to the product characteristics of the overseas supplier, HR 62 is a copolymer designed for bonding, better flow, longer elongation and good hot tear with silica filler and finds application in bonding, oil seal, and bellows. It is a di-polymer of hexafluoropropylene and vinylidene fluoride plus curatives & fillers. The product comes in white coloured sheets and is capable of functioning in temperatures up to 204°C. This product is recommended for use in petroleum, minerals, and vegetable oils, silicone fluids, aromatic hydrocarbons (Benzene, Toluene) and chlorinated hydrocarbons, high vacuum, ozone, weather and aging resistance; and is not recommended for use in hot water and steam, auto and aircraft brake fluids, amines, ketones, low molecular weight esters and ethers. The supplier also manufactures other high heat resistant synthetic rubber compounds like HR 65, HR 81, HR84 and HR 495C, with different properties and applications.

6. I have perused the material on record, the submissions made at the time of hearing, both written and oral, and have also perused the information available in the website of the supplier, namely, M/s. Simon Industry Corporation, Taiwan. The product, or rather the range of products under consideration are primarily based on two polymers, namely hexafluoropropylene and vinylidene fluoride. The range of products based on the above two polymers also contain silica, carbon black, natural ester wax and a curative package which is a trade secret of the manufacturer. Polymers by themselves are classifiable under Chapter 39 of the tariff. However, since this is a di-polymer consisting of two different polymers, and also contain other ingredients, the end result is a synthetic rubber. As per Note 1 to Chapter 40, `Except where the context otherwise requires, throughout this Schedule the expression “rubber” means the following products, whether or not vulcanised or hard: natural rubber, balata, gutta-percha, guayule, chicle and similar natural gums, synthetic rubber, factice derived from oils, and such substances reclaimed.’ The Note 4 of the Chapter states that ‘In Note 1 to this Chapter and in heading 4002, the expression “synthetic rubber” applies to:

(a) unsaturated synthetic substances which can be irreversibly transformed by vulcanisation with sulphur into non-thermoplastic substances which, at a temperature between 18°C and 29°C, will not break on being extended to three times their original length and will return, after being extended to twice their original length, within a period of five minutes, to a length not greater than one and a half times their original length. For the purposes of this test, substances necessary for the cross-linking, such as vulcanising activators or accelerators, may be added; the presence of substances as provided for by Note 5(B)(ii) and (iii) is also permitted. However, the presence of any substances not necessary for the cross-linking, such as extenders, plasticisers and fillers, is not permitted;

(b) thioplasts (TA/ V; and

(c) natural rubber modified by grafting or mixing with plastics, depolymerised natural rubber, mixtures of unsaturated synthetic substances with saturated synthetic high polymers provided that all the above-mentioned products comply with the requirements concerning vulcanisation, elongation and recovery in (a) above.’

Chapter Note 5 states that, `(4) Headings 4001 and 4002 do not apply to any rubber or mixture of rubbers which has been compounded, before or after coagulation, with:

(i) vulcanising agents, accelerators, retarders or activators (other than those added for the preparation of pre-vulcanised rubber latex);

(ii) pigments or other colouring matter, other than those added solely for the purpose of identification;

(iii) plasticisers or extenders (except mineral oil in the case of oil-extended rubber), fillers, reinforcing agents, organic solvents or any other substances, except those permitted under (B);

(B) the presence of the following substances in any rubber or mixture of rubbers shall not affect its classification in heading 4001 or 4002, as the case may be, provided that such rubber or mixture of rubbers retains its essential character as a raw material:

(i) emulsifiers or anti-tack agents;

(ii) small amounts of breakdown products of emulsifiers;

(iii) very small amounts of the following:

heat-sensitive agents (generally for obtaining thermossensitive rubber latexes), cationic surface-active

agents (generally for obtaining electropositive rubber latexes), anti-oxidants, coagulants, crumbling agents, freeze-resisting agents, peptisers, preservatives, stabilisers, viscosity-control agents, or similar special-purpose additives.’

7. According to literature available in public domain, compounding or formulation of rubber refers to the addition of certain chemicals to raw rubber in order to obtain the desired properties. These chemicals may be crosslinking agents, reinforcements, anti-degradants and/or colourants. The crosslinking agents are required for establishing the crosslinks to interconnect at molecular level thus improving the strength and elasticity. Unformulated elastomers have high molecular weights with low elasticity and strength. Through formulation, long-chain molecules are chemically linked together, forming networks and transforming the material from a viscous liquid to elastic solid. This is what happens during vulcanization or curing, which increases the strength and the modulus and decreases the hysteresis. Sulphur is widely used as the vulcanization agent. A deformed elastomer stores the input energy in terms of elastic potential energy in the chains. This is released upon crack growth and acts as the driving force for fracture to propagate. The remaining energy is dissipated into heat through the molecular motions. Tight network of the molecular chain due to high crosslink levels restrict the chain motion preventing the network from dissipating much of the energy which causes brittle fracture at low elongation. Too high crosslink level is undesirable and can lead to brittle fracture and too little crosslinks may not be strong enough to resist viscous flow failure. Therefore, the optimum density range of the crosslinks for practical use needs to be determined. Reinforcing agents of the rubber compound act as stress arrestor and are required to have high specific area. This means that the particle must be smaller than I gm in size. Typical fillers are carbon black and silica. A primary particle size as small as 0.1 Km can be obtained which can give a specific area of a few hundred square meters per gram of filler.

8. Considering the mandate of the Chapter Note 5A, that, headings 4001 and 4002 do not apply to any rubber or mixture of rubbers which has been compounded, before or after coagulation, with vulcanising agents, accelerators, retarders or activators (other than those added for the preparation of pre-vulcanised rubber latex); pigments or other colouring matter, other than those added solely for the purpose of identification; plasticisers or extenders (except mineral oil in the case of oil-extended rubber), fillers, reinforcing agents, organic solvents or any other substances, except those permitted under (B); and the fact that from the product literature, it is clear that the product/s under consideration contain at least 20% and up to 40% of materials like silica, carbon black, natural ester wax, and a curative package which is a trade secret of the manufacturer, leads one to the conclusion that heading 40.02 is not an appropriate heading for the group of products sought to be imported. On the other hand, I am inclined to concur with the views of the Commissioner of Customs, Import – II, NCH, Mumbai that heading 40.05, meant specifically for compounded rubber, is a more appropriate choice. Even though, heading 40.05 doesn’t specifically mention synthetic rubber, placing reliance on Chapter Note 1, that the term rubber includes synthetic rubber, it appears to be the correct heading for rubber compounded with silica and carbon black.

In view of the aforementioned discussions, I rule those various grades of synthetic rubber, e.g., HR 62, HR 65, HR 81, HR 84, and HR 495 C, manufactured by Simon Industry Corporation, Taiwan and sought to be imported by the applicant merit classification under heading 40.05, and more specifically, under sub-heading 40051000 of the first schedule to the Customs Tariff Act, 1965.

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