1. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
2. Present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “CGST Act” and “MGST Act”] by M/s. Royal Carbon Black Private Limited, New Era Mills Compound, Mogul Lane, Matunga (West), Mumbai- 400 016 (“hereinafter referred to as “Appellant”) against the Advance Ruling No. GST-ARA-50/2019-20/B-60 dated 15.12.2020, pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as “the MAAR”).
BRIEF FACTS OF THE CASE
3.1 The Appellant is a company engaged in the business of manufacture and supply of Tyre Pyrolysis Oil, Pyrolysis Oil, Mixed Oil, Non-Pyrolysed Steel, Carbon Black Powder, Crumb Rubber, Steel Scrap, Pyrolysis Plant, etc. derived from the scrap automobile rubber tyres.
3.2 The Appellant vide application dated 07.10.2019 sought an Advance Ruling from the MAAR regarding the (HSN) classification of “Tyre Pyrolysis” and the duty applicable therein.
3.3 For the purpose of Central Excise, the Tyre Pyrolysis Oil was classified under the Tariff Heading of ‘38249990 – Light, Heavy & Mixed Chemical Oil’
3.4 In Support of its contention, the Appellant has submitted a Test Report of its Tyre, and described the manufacturing process of the same which is as under:
“Tyre is made of 30% to 35% carbon, 35% to 40 % rubber and 10% to 15% steel. Once the tyres are removed from the car it becomes a waste. This waste material is used as raw material in a pyrolysis process to recover and recycle the materials. Steel in the tyre is removed during the process and sold as scrap steel for re-melting. Carbon in the tyre is recovered as carbon black and sold. The rubber component is converted into oil which can be used for heating purposes and can be called as pyrolysis oil. Like Biodiesel, Pyrolysis oil can also be sold in similar applications as a liquid fuel. Therefore, the process involves complete recycling of Tyre.”
3.5 Pyrolysis oil is the oil/fuel produced from the thermal decomposition of Biomass. Like Biodiesel, Pyrolysis Oil can also be sold for similar applications as those of liquid oil. As per experts, Pyrolysis Oils is described as under:
“Biomass is widely accepted as a potential source of energy, and is the only renewable energy source that can be converted into several types of fuels, including liquid, clear, and gas, which also promise flexibility in production and marketing. Pyrolysis is generally chosen as a recommended process to achieve this goal. This process has received more attention recently because it can produce the highest liquid yield of up to 75 % with conditions of moderate temperature (500o C) and short hot vapor residence time (1s) [10,11] Nevertheless, the yield of other products also can be optimized by adjusting the parameters of operating conditions. The liquid from the pyrolysis process is known as pyrolysis oil or bio-oil, and has potential for use as fuels or as feedstock for many commodity chemicals”
Source: Faisal Abnisa Wan and Mohd AshriWan Daud, “A review on co-pyrolysis of biomass: An optional technique to obtain a high-grade pyrolysis oil”, Energy Conversion and Management, Volume 87, November 2014, Pages 71-85.
3.6 As per the Appellant in the Application before the Authority for Advance Ruling, Pyrolysis Oil ought to be qualified as under:
“i) Biodiesel (3826) as it is derived from rubber part of the Tyre, which is renewable in nature just like Palm Oil made from Palm fruit used to make biodiesel.
ii) Alternatively, it should be classified as Marine Fuel (2710) as its specifications meet that of Marine fuels.”
3.7 The MAAR, vide its Order No. GST-ARA-50/2019-20/B-60 dated 15.12.2020, has held that the Advance Ruling Authority cannot pass any ruling in respect of the question raised by the Appellant on account of non-submission of the details regarding the chemical composition of the impugned product. Thus, the MAAR did not answer the question asked by the Appellant.
4. Aggrieved by the aforesaid Advance Ruling wherein the MAAR refrained from answering the question raised by the Appellant, the Appellant has preferred the present appeal before the Maharashtra Appellate Authority for Advance Ruling (hereinafter referred to as “the MAAAR”) on the grounds mentioned hereinbelow:
Grounds of Appeal
5.1 That the Impugned Order dated 15.12.2020 does not conform to the provisions of the Section 98 of the Maharashtra Goods and Services Tax Act, 2017 (‘MGST’). As per the provisions of Section 98 (2) of the MGST, the AAR on receipt of an application is required to either admit or reject an application. As per Section 98(4) ibid., if the AAR admits an application, the AAR shall, after examining such further material as may be placed before it by the applicant, or obtained by the Authority, and after providing an opportunity of being heard to the applicant or his authorised representative as well as to the concerned officer or his authorised representative, pronounce its advance ruling on the question specified in the application.” In the present case, the Ld. AAR has failed to decide upon the application of the Appellant. The Ld. AAR after admitting the application of the Appellant on 11.02.2020 vide its order dated 15.12.2020 has not pronounced its ruling on the question specified by the Appellant in their Advance Ruling Application. Thus, the MAAR has contravened the provisions of the MGST Act, 2017, by refraining from answering the questions raised by the Appellant.
5.2 That the Appellant, during the proceedings before the AAR along with application, filed a test report as Annexure A which gave specification of the Pyrolysis Oil and also filed Annexure B which described the manufacturing process of Pyrolysis Oil. The Appellant, during the proceedings, also filed a reply in furtherance of their application. The Ld. AAR has incorrectly failed to consider the same and passed the impugned Order wherein MAAR has refused to answer the question raised by the Appellant.
5.3 That the impugned Order does not adhere to the provisions of Section 98 of the MGST Act, 2017. It is trite law that where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner, and in no other manner Reliance has been placed on decisions of the Supreme Court of India in Chandra Kishore Jha vs. Mahavir Prasad, AIR 1999 SC 3558 (para 12), Dhananjaya Reddy vs. State of Karnataka, AIR 2001 SC 1512 (para 22). Thus, when Section 98 (4) of MGST Act, 2017 require that the Ld. AAR after admitting an application pronounce a ruling on the questions raised in the application before it, the Ld. AAR ought to have answered the questions in the Appellant’s case.
5.4 That the Pyrolysis Oil being manufactured by the Appellant from rubber tyres ought to be classified as ‘Biodiesel’ under the Heading 3826 of the Notification Number 01/2017-CT (Rate) dated 28.06.2017, or alternatively, be classified as ‘Marine Fuel’ under the Heading “2710” of the said Notification Number 01/2017-CT (Rate) dated 28.06.2017;
Contention of the Jurisdictional Officer
6. The Jurisdictional Officer, vide their reply dated 27.08.2021, has made the following submissions:
(i) That reference has been made to the Wikipedia definition of the “Biodiesel”, which is being reproduced hereinunder:
Biodiesel refers to a vegetable oil, or animal fat – based diesel fuel, consisting of long-chain alkyl (methyl, ethyl, or propyl) esters. Bio-diesel is typically made by chemically reacting lipids (e.g., vegetable oil, soybean oil, animal fat (tallow)) with an alcohol producing fatty acid esters. Bio-diesel is a drop-in bio-fuel, and thus meant to be used in the standard diesel engines, and is thus distinct from the vegetable and waste oils used to fuel converted diesel engines. Biodiesel can be used alone, or blended with petro diesel in any proportions. Biodiesel blends can also be used as heating oil.
Marine Fuel :
Marine fuel/Fuel Oil (also known as heavy oil or furnace oil) is a fraction obtained from petroleum distillation, either as a distillate or as a residue. In general terms, fuel oil is any liquid fuel that is burned in a furnace or boiler for the generation of heat, or used in an engine for the generation of power, except oils having a flash point of approximately 420 Celsius (1080 F) and oils burned in cotton or wool-wick burners. Fuel oil is made of long hydro-carbon chains, particularly, alkanes, cyclo-alkanes, and aromatics. The term fuel oil is also used in a stricter sense to refer only to the heaviest commercial fuel that can be obtained from crude oil, i.e., heavier than gasoline and naptha.
(ii) By relying upon the above-mentioned definitions of the Biodiesel oil, it is contended that Biodiesel is typically made of chemically reacting lipids, all of which are organic in nature, while Pyrolysis Oil is derived from the inorganic sources. Hence, the impugned product does not merit classification under the Heading “3826” bearing the description “Biodiesel”.
(iii) It has been further contended that the manufacturing processes of the impugned product, i.e., Tyre Pyrolysis Oil, do not involve any distillation of the crude petroleum oil whereas the Marine Fuel/Fuel Oil are derived from the fractional distillation of the crude petroleum oil, therefore, the impugned product does not merit classification as “Marine fuel” under the Heading “2710”.
7.1 The first personal hearings in the matter, held on 29.09.2021, was attended by Shri Chintan Shah, Advocate, and the second personal hearing, held on 07.04.2022, was attended by Shri Chintan Shah, Advocate. Shri Shah, at the start of the proceedings, made reference to the Hon’ble Supreme Court Orders dated 23.03.2020 and 23.09.2021 vide which it has been clarified that in computing the period of limitation in filing any suit, appeal, application or proceeding, the period from 15.03.2020 to 02.10.2021 shall stand excluded. Shri Shah further argued that as the impugned Advance Ruling Order had been passed on 15.12.2020 and the appeal this had been filed on 17.08.2021, there was no delay in the filing of the appeal under consideration, and therefore, pleaded to admit the appeal. Consequently, the Bench accepted the contention of the Appellant and admitted the appeal under question.
7.2 Shri Shah then referred to the impugned Advance Ruling Order wherein the Advance Ruling Authority had refrained to pass any ruling as to the classification of the impugned product, i.e., Tyre Pyrolysis Oil, stating that since the Appellant had not provided any test report with respect to the constituents of the impugned product, they are not in a position to classify the product under question. In this regard, Shri Shah contended that the Appellant may be granted opportunity to present the test reports in respect of the constituents of the impugned product along with other required documents before the Maharashtra AAR so that the ruling in respect of the questions raised in the Advance Ruling application may be obtained. In view of this, Shri Shah requested to set aside the impugned Advance Ruling Order.
DISCUSSIONS AND FINDINGS
8. We have carefully gone through the appeal memorandum encapsulating the facts of the case and the grounds of the appeal along with all the additional submissions made by the Appellant during the course of the personal hearing proceedings. We have also examined the impugned Advance Ruling passed by the MAAR, wherein the MAAR has refrained from passing the advance ruling in the matter citing the reason that the Appellant has not provided the details regarding the chemical composition of the impugned product, i.e., Tyre Pyrolysis Oil.
9. However, the Appellant, in their grounds, have contended that they have submitted the Test Reports consisting the chemical composition of the impugned Product during the course of the proceedings before the MAAR along with the details of the manufacturing processes carried out to obtain the impugned product. In such circumstances wherein the Appellant and the MAAR are contradicting each other factually and considering the plea of the Appellant that they may be permitted to present the Test Reports of the impugned product along with other required documents afresh before the Advance Ruling Authority to get the required Advance Ruling, it is opined that issue under question may be heard by the Advance Ruling Authority on merit after calling for all the required documents as it may deem fit to pronounce its ruling in the matter.
10. In view of the above, we pass the following order:
11. We, hereby, set aside the Advance Ruling passed by the MAAR vide Order No.GST-ARA-50/2019-20/B-60 dated 15.12.2020, and hold that the case may be decided on merit after calling for all the required documents from the Appellant. Accordingly, the case is remanded back to the Maharashtra AAR for passing the advance ruling in respect of the questions asked by the Appellant. Thus, the subject Appeal stands disposed of in the above terms.