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Case Law Details

Case Name : In re Finster Black Private Limited (CAAR Mumbai)
Appeal Number : Ruling No. CAAR/Mum/ARC/37/2024
Date of Judgement/Order : 08/03/2024
Related Assessment Year :
Courts : CAAR

In re Finster Black Private Limited (CAAR Mumbai)

The Customs Authority for Advance Rulings, Mumbai, recently deliberated on the classification of Tyre Pyrolysis Oil and Tyre Pyrolysis Recovered Carbon Black, shedding light on their categorization under the Customs Tariff Act, 1975. The ruling by CAAR Mumbai addresses the classification of Tyre Pyrolysis Oil (also known as Depolymerisation Oil) and Tyre Pyrolysis Recovered Carbon Black. The applicant, Finster Black Private Limited, sought clarity on the classification of these products and their eligibility for import/export.

Tyre Pyrolysis Oil, obtained through the pyrolysis process of end-of-life tires, presents unique challenges in classification due to its diverse physical and chemical properties. The ruling considered various aspects, including the source material, manufacturing process, and utility of the product. Despite similarities with biodiesel in some aspects, TPO was classified under heading 27101990 as an industrial liquid fuel oil, distinct from standard petroleum oils or biodiesel.

Recovered Carbon Black, a by-product of the tyre pyrolysis process, underwent similar scrutiny. Despite being chemically defined and obtained through pyrolysis, it was distinct from natural carbons and solid fuels, leading to its classification under subheading 28030010.

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

M/s. FINSTER BLACK PRIVATE LIMITED (having IEC No. AADCF8884D and hereinafter referred to as ‘the applicant’, in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 27.09.2023 along with its enclosures in terms of Section 281-1(1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’ also). The applicant is seeking advance ruling on the classification of “Tyre Pyrolysis Oil (Depolymerisation Oil) and Tyre Pyrolysis Recovered Carbon black”. The applicant has also sought advance ruling as to the question “If Tyre Pyrolysis Oil under negative List or require any additional NOC/licenses for export”.

2. Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) raised enclosed with the CAAR-1 application:

That as per study of committee comprising CPCB-Delhi, IIT-Delhi and NEERI-Nagpur (Study on Tyre Pyrolysis Plant’s adequacy Pg 7), Pyrolysis technically is defined as follows:

“Pyrolysis is chemical reaction that involves molecular breakdown of larger molecules to smaller molecules by heating in absence of air. Pyrolysis is also known as Reverse cracking, thermolysis, depolymerisation etc”. Further, manufacturing flow process of Pyrolysis technically is defined as follows:

Typically, the process of Tyre pyrolysis includes feeding of scrap tyres, into reactor where they are heated in absence oxygen for breakdown of long chain hydrocarbons (polymers). The reactors are generally 2.1M to 2.8M of diameter and 6M to 6.5M length. Heating of the reactor is carried out through burners which uses liquid, gas or wood for initial heating. The reactor is slowly rotated during the heating process. Tyre Pyro gas starts generating at around 120°C -150°C. Top of Outer Jacket of the reactor is connected to air pollution control devices, 1D fans and stack height of 30M from ground for flue gas emissions. The reactor is maintained at 200°C for 1.5-2.0 hours and then increased to 250°C to 300°C where it is maintained for 3 to 4 hours. The operating temperature varies from unit to unit and in some cases it goes even up to 500°C. Reactor is further connected with series of condensers where condensation of gases produces Tyre Pyrolysis Oil. The lighter fraction of the gases (uncondensed pyro gas) produced in the process are used as fuel for heating of reactor. The excess uncondensed Pyro Gas is either flared up or re circulated for reactor heating or in some cases stored for subsequent usage. After the completion of process, the Tyre pyrolysis carbon black and Tyre pyrolysis steel wire-scrap inside the reactor are taken out. These products are unloaded from the reactor after purging the reactor with nitrogen Gas.

the reactor after purging the reactor with nitrogen Gas

The Flow process chart of Tyre pyrolysis along with Material Mass Balance also along with their intended utilizations / end use were as follows:

intended utilizations end use were as follows

Tyre pyrolysis is the process of converting waste tyres into like Tyre Pyrolysis Oil (Main product), Tyre Pyrolysis recovered Carbon Black (By product -1), Tyre pyrolysis recovered Steel Wire scrap (By product -2) and Hydrocarbon Gas (Intermediate Product). In simple words, Latex which arc milk of rubber trees are nothing but “Carbo-Hydrates”. This long chain of “Carbo-Hydrates” arc reverse cracked i.e. pyrolysed in to medium and short chains of “Hydro — Carbon”. Medium chain of Hydrocarbon arc condensable liquids which are commercially known as Tyre Pyrolysis Oil (Main Product) and shorter chain of Hydrocarbon are non – condensable Gas which are commercially known as Tyre Pyrolysis Gas (Intermediate Product). Carbon Black which are used as filler in Tyre manufacturing is recovered as Recovered carbon Black (By product # 1). Steel used as reinforce for strength during Tyre manufacturing is recovered as Pyrolysed Tyre wire steel Scrap (By product #2).

The scrap tyres are being processed in batches, with duration of each batch about 24­28 hours in Reactors. It takes 4 hours to mechanically load the tyres into the reactor. Initially, to attain the favourable temperature, Tyre pyrolysis oil is being used for burning in duel fuel burner. Once the reactor attains the temperature (360°C to 380°C), to breakdown the molecules, the vapours are generated. The vapour is liquefied to obtain pyrolysis oil by using condenser. The non-liquefied vapor is combustible gas, which is utilized to further increase the temperature of the reactor for completion of process. The reactors are set to maintain at a controlled temperature and pressure for about 7-9 hours. After which the reactors are set to cool for about 10-12 hours. Once the batch process is completed, Carbon black, the intermediate product of the process is recovered from the reactor mechanically through screw. Duration to unload the fractions from the reactor takes about 2-4 hours. Tyre wire Steel Scraps are removed mechanically after opening of reactor door.

As per study report of committee comprising CPCI3-Delhi, IIT-Delhi and NEERI-Nagpur (Study on Tyre Pyrolysis Plant’s adequacy — p. g. 18), in conclusions of the study, Tyre pyrolysis oil’s parameter is observed as follows:

“Tyre Pyrolysis Oil (TPO) has high calorific value in the range of 6300kcal/kg to 10200kcal/kg and low sulphur content in range of 0.87% to 1.28% wt. Ash content 0.087% wt., total halogen in the range of 146.27 ppm to 287.4 ppm. The carbon number varies from C4-C30, flashpoint is Class B i.e. 42°C to 54°C, boiling range from 66.4°C to 312°C. Sediment ranges from 0.002% to 0.0063% wt., PONA ranges from 69.53% to 70.87% v/v pour point varies from -30°C to -6°C. Conrad son carbon residue ranges from 0.62% to 3.41% and kinematic viscosity at 40°C ranges from 3.67 to 6.12. The value of Sulphur content, calorific value, Sediments, Lead, arsenic, Cadmium + Chromium + Nickel, PAI I, Total Halogens, PCB’s and water content in TPO is well within specified for fuel oil”.

As per independent test done by Applicant with Tyre pyrolysis recovered Carbon Black, the same has high calorific value from range of 6000Kcal/kg to 6500 Kcal/Kg, Ash & VM to 23% by wt. max, 2% by wt. of moisture content and 70 to 80% fixed carbon. The process of manufacturing recovered carbon black from the chor or raw carbon received from the reactor requires sieing, magnetic separation, grinding operation to be done.

Technical Sheet/Product Sheet submitted by the applicant is follows: Depolymerisation Oil (Pyrolysis oil) has been product of end of life rubber recycling. Middle molecular hydrocarbons condensed during the process of rubber pyrolysis is Depolymerisation Oil (Pyrolysis oil). Initial processing was limited to mass condensation of hydrocarbon gas.

Physical & chemical properties:

Physical State

Liquid
Appearance LOVIBOND pigmented Liquid.
Odour Slight aromatic hydrocarbon
Odour threshold Data not available
p1-1 Neutral
Pour point -12 °C / 10 °F
Flash point Ambient (Around 40C to 90C varies batch to batch)
Upper/lower Flammability or Explosion limits Typical 1 – 10 %(V) (based on mineral oil)
Auto-ignition temperature > 110 °C (estimated values)
Vapour pressure < 0.5 Pa at 20 °C / 68 °F (estimated value(s))
Relative Density < 1
Water solubility Negligible.
Vapour Density Data not available

Tyre pyrolysis oil which is a dark colour viscous liquid with Tyre smell cannot be used in Automative engines due to its high density, high viscosity, Carbon reside and lower cetane number. Hence, Tyre pyrolysis oil (TPO) is used predominantly as Industrial Liquid Fuel oil in burners and other heat applications such as reactors, boilers, heat furnace etc. The oil is also used as an input to chemical plants such as SHELL and BASF for other alternative non energy uses. Tyre pyrolysis recovered carbon black after cleaning and grinding used as a replacement of virgin carbon blacks in plastic, paint and rubber industry.

The applicant has submitted that from the above mentioned technical properties it is very clear that the subject goods viz. Tyre Pyrolysis Oil (TPO) is not similar to Petrol/ Diesel/ Kerosene Oil. Since, the subject goods do not match with any specific 13IS standard and the subject goods are being used as furnace oil/chemical plant raw material it may be fit to be classified under CTH 27101990 and Recovered Carbon Black may be fit to be classified under CTH 28030010.

3. Statement containing applicant’s interpretation of law and/or facts, as the case may be, in respect of the questions(s) on which advance ruling is required is follows:

Chapter 27, Heading 2710 refers to “Petroleum oils and oils obtained from bituminous minerals (other than crude) and preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, other than those containing biodiesel and other than waste oils:” The applicant further submits that on random import of Tyre pyrolysis oil, Customs Revenue Control Labs, Chennai has analysed the same and reported as “The sample is in the form of brown coloured liquid. It is mainly composed of Mineral Hydrocarbon oil. It is other than fuel oil / Petrol / Diesel / Kerosene”.

Carbohydrates that is Latex of rubber trees used in manufacturing of tyres is reverse cracked i.e. pyrolysed thereby obtaining Hydrocarbon oil which conforms to the condition “other than crude, not being waste oil or bio diesel”. Hence heading 2710 is practised by all Pyrolysis units in India. On further study on other items in sub headings in the complete chapter which has separate BIS standards such Fuel Oil / Petrol / Diesel / Kerosene or any other sub headings. Tyre Pyrolysis oil will not confirm to such BIS standards. In above situation i.e. in absence of separate sub headings & BIS standards for Tyre Pyrolysis Oil (TPO), Applicant sought advance ruling to import/export Tyre Pyrolysis oil which is mineral hydrocarbon oil which is not of crude base in the HS CODE 2710.1990 — others. Clarification is also sought by the applicant on import/export of Tyre pyrolysis recovered carbon under heading 28030010 others (Tyre pyrolysis recovered carbon black).

4. Nhava Sheva-I, JNCH which is the concerned jurisdictional Customs Commissionerate has responded to the subject application vide letter dated 10.11.2023 and the same is reproduced as under:

“The applicant in his application furnished IEC Number AADCF8884I) and subject to the satisfaction of the Authority appears eligible under the provisions of 28-E(c). Though, this office (NS-I, JNCH) is of the opinion that the application seeking tariff heading for Pyrolysis Oil is not something that require advance ruling as the tariff heading 27101990 is already entry for ‘WASTE OILS’. Similarly, the ‘CARBON BLACK’ is specifically defined under tariff heading 28030010. The same position is established by CAAR, Mumbai in case of – In re Pairan Pyrolysis Pvt. Ltd. (CAAR Mumbai) Appeal number: Advance Ruling No. CAAR/Mum/ARC/09/2022 dated 11.04.2022. From open source available for export and import data world over it is seen that that the two commodities are settled for the classification in the two above mentioned tariff headings only. The Explanatory Notes Harmonised Commodity Description and Coding System published by World Customs Organisation under Chapter heading also support the same. Here in this case it is observed that there is already one advance Ruling for the Pyrolysis Oil and the Carbon Black retrieved/ recoverable from the Tyre waste. In view of the reasons, as mentioned above the Pyrolysis Oil and carbon Black is classifiable in heading 27101990 and 28030010 respectively”.

5. A personal hearing in the matter was conducted on 12.01.2024 in office of the CAAR, Mumbai. During the personal hearing the authorized representative of M/s. FINSTER BLACK PRIVATE LIMITED, Shri Ashwani Kumar Prabhakar, Consultant reiterated their earlier written submissions made in the applications to CAAR, Mumbai. They also relied upon case law 2022 (382) ELT 282 AAR Cus-Mumbai in the matter of Pairan Pyrolysis Pvt. Ltd. (dated 11.04.2022) to strengthen their argument. Nobody appeared from the concerned Jurisdiction Commissionerate i.e. Nhava Sheva-I, JNCH during the said Personal Hearing either in person or through online video conferencing.

6. I have taken into consideration all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing. I have also gone through the response received from the Nhava Sheva-I, JNCH.

In the instant case, the applicant has sought ruling on two aspects, first the classification of “Tyre Pyrolysis Oil (Depolymerisation Oil) and Tyre Pyrolysis Recovered Carbon black” and the second regarding “If Tyre Pyrolysis Oil under negative list or require any additional NOC/licenses for export”. The applicant has not explained the specific perspective of their query as far as the second issue is concerned, they however, simply made a reference to Enclosures 1&2 of their application, but, I observe that there is no any mention of details of such query. Hence, it appears that this question is ambiguous, uncertain and having lack of clarity. Further, vide an Email, office of the CAAR, Mumbai has sought clarifications regarding this question, but, this authority has not received any comments or clarification in this regard. Due to non-submission/production/in absence of required documents/literature, I proceed to decide the present applications only regarding classification of “Tyre Pyrolysis Oil (Depolymerisation Oil) and Tyre Pyrolysis Recovered Carbon black” on the basis of the information on record as well as the existing legal framework having bearing on the classification of the products in question under the first schedule of the Customs Tariff Act, 1975.

6.1 The Tyre Pyrolysis Oil (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 determined based on the submissions made by the applicant. The item under consideration can be classified either as biodiesel under heading 3826 or as mineral fuel under chapter 27. As per GRI 1, the table of contents, alphabetical index, and titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the succeeding rules of classification. The explanatory notes to heading 3826 states that biodiesel can be obtained from vegetable oils (e.g., rapeseed, soya-bean, palm, sunflower, cotton-seed, jatropha), from animal fats (e.g., lard, tallow) or from used oils or fats (e.g., frying oils, recycled cooking grease).

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. Relevant extract of the explanatory notes to heading 3826 is reproduced as follows:

38.26 – Biodiesel and mixtures thereof, not containing or containing less than 70 % by weight of petroleum oils or oils obtained from bituminous minerals.

Biodiesel consists of mono-alkyl esters of fatty acids of various chain lengths, immiscible with water, with a high boiling point, low vapour pressure and a viscosity similar to that of diesel oil produced from petroleum. Biodiesel is typically made by a chemical process called transesterification, whereby the fatty acids in oils or fats react with an alcohol (usually methanol or ethanol) in the presence of a catalyst to form the desired esters.

It can be obtained from vegetable oils (e.g., rapeseed, soya-bean, palm, sunflower, cotton-seed, jatropha), from animal fats (e.g., lard, tallow) or from used oils or tats (e.g., frying oils, recycled cooking grease).

Biodiesel itself contains neither petroleum oils nor oils obtained from bituminous minerals but can be mixed or blended with distillate fuels obtained from petroleum or bituminous minerals (e.g., diesel, kerosene, heating oil). Biodiesel can be used as fuel for compression-ignition internal combustion piston engines, production of thermal energy or similar uses.

6.2 Chapter 27, on the other hand, covers coal and other natural mineral fuels, petroleum oils and oils obtained from bituminous minerals, their distillation products, and products of a similar kind obtained by any other process. In this chapter, oils are covered under headings 2707, 2709 and 2710. Heading 2709 covers crude petroleum oils and crude oils obtained from bituminous minerals (e.g., from shale, calcareous rock, sand), i.e., natural products, whatever their composition, whether obtained from normal or condensation oil-deposits or by the destructive distillation of bituminous minerals. As pyrolysis oil is not obtained from natural products, heading 2709 is not applicable. Heading 2707 covers oils and other products obtained by the distillation of high-temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents. The weight of the non-aromatic constituents exceeds that of the aromatic constituents and the typical aromatic to non-aromatic ratio is 10%-30% to 70%-90%. As the weight of non-aromatic constituents exceeds that of the aromatic constituents, TPO under consideration is not classifiable under heading 2707.

Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70 % or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils arc included in heading 2710. This heading covers oils obtained in more or less broad fractions by the distillation or refining of crude petroleum oils or of crude oils obtained from bituminous minerals and other oils having similar characteristics. Note 2 to Chapter 27 states- 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 nonaromatic constituents exceeds that of the aromatic constituents. The I ISN explanatory notes to heading 2710 elaborate that the heading 2710 includes, inter-alia, other similar oils in which the weight of the nonaromatic constituents exceeds that of the aromatic constituents. TP0 consist of mixed hydrocarbons and the weight of the non-aromatic constituents exceeds that of aromatic constituents. I-ISN explanatory notes further state that these oils may be obtained by the low-temperature distillation of coal, by hydrogenation or by any other process (e.g., by cracking, reforming, etc.). 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 subheading 27101990 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.

7. In respect of the 2nd item under consideration, i.e., recovered carbon black, there is a specific entry in schedule-1 of the Customs Tariff Act, 1975 as 28030010. Carbon black is a by-product of the processes described in para 2 Note 1(a) to chapter 28 states that except where the context otherwise requires, the headings of this chapter apply only to: separate chemical elements and separate chemically defined compounds, whether or not containing impurities. Carbon black is a chemically defined material. The HSN explanatory notes to heading 2803 state that carbon black results from the incomplete combustion or cracking (by heating, by electric arc or by electric sparks) of organic substances rich in carbon. In the present case, the carbon black is recovered under the pyrolysis of tyres. Further, HSN notes state that it may contain oil impurities. Primarily, carbon black is used as a pigment for the manufacture of paint, printing ink, shoe polish, etc., in making carbon paper, and as a reinforcing agent in the rubber industry. HSN notes to heading 2803 exclude natural carbons in the form of solid fuels (anthracite, coal, lignite); coke, agglomerated fuels and gas carbon (Chapter 27) from heading 2803. Solid fuels manufactured from coal are covered under subheading 270120. The source material for the solid fuel mentioned in subheading 270120 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 subheading 270120. Accordingly, the carbon black under consideration is not excluded from heading 2803. Therefore, recovered carbon black merits classification under subheading 28030010.

8. On going through the issue at hand and available case laws in this regard it has been observed that a recent ruling No. CAAR/Mum/ARC/09/2022 dated 11.04.2022 in the case of M/s. Pairan Pyrolysis Pvt. Ltd. is passed on the question of classification of the same products i.e. “Tyre Pyrolysis Oil (Depolymerisation Oil) and Tyre Pyrolysis Recovered Carbon black”, Customs Authority for Advance Rulings has ruled that the said products merit classification under sub-heading 2710 1990 and 2803 0010 respectively. I have gone through the observations of the Authority in the case of M/s. Pairan Pyrolysis Pvt. Ltd. and I am of the view that the Authority in the case ibid has deliberated upon every aspect to decide the case on merit. Further, the concerned jurisdictional Commissionerate i.e. Nhava Sheva-I, JNCH has also concurred with the contention of the applicant and has specifically mentioned that said items i.e. Tyre Pyrolysis Oil (Depolymerisation Oil) is classifiable under sub-heading 2710 1990 and Tyre Pyrolysis Recovered Carbon black is classifiable under sub-heading 2803 0010.

9. On the basis of foregoing discussions and findings, I rule that the Tyre pyrolysis oil and Tyre Pyrolysis Recovered Carbon black merit classification under CTI 27101990 and 28030010 respectively, of the first schedule of the Customs Tariff Act, 1975.

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