Importation of Carbon Back Feedstock Oil is Subject Only to the 10% VAT

May 31, 1991 BIR RULING NO. 093-91 101 (a) 000-00 093-91 Gentlemen : This refers to your letters dated October 25 and December 11, 1990 and February 21, 1991 requesting reconsideration of the ruling of this Office dated October 9, 1990 to Sky Freight Brokerage, Inc., Ground Floor, FEMII Bldg., Andres Soriano Jr. St. (formerly Aduana Street.) Intramuros, Manila, to the effect that carbon back feedstock oil (petroleum based aromatic concentrate) is considered an aromatic extract subject to P4.50 excise tax per liter and 10% value-added tax pursuant to Sections 145 (a) (1) and 101 (a) both of the Tax Code, as amended. cdtech In your aforementioned letters, you stated that carbon black feedstock oil (petroleum based aromatic concentrate) is not a base stock for lube oils and greases; that it is not used for high vacuum distillates, aromatic extracts and other similar preparations; that carbon black feedstock oil, while petroleum based and aromatic concentrate is used mainly for the production of your only product carbon black which is one of the raw materials used for your tire production; that it is likewise used as blast fuel for your furnace; that carbon black feedstock oil is not an aromatic extracts, it is nothing more than the heavy residual oil or by product of FCCU (Fluid Catalytic Cracking Unit) operations; and that since carbon black feedstock oil has the properties of a petroleum based product similar to bunker fuel, you are of the opinion that it is not an aromatic extracts which is subject to P4.50 excise tax per liter of volume capacity pursuant to Section 145 (a) (1) of the Tax Code, as amended but should be subject to ad valorem tax of 0% as "similar fuel oil" under Section 145 (b) (3) of the Tax Code, as amended. In reply thereto, I have the honor to inform you that the carbon black feedstock oil (petroleum based aromatic concentrate) which you import as an input in your production of carbon black end which is one of the raw materials used for tire production, although petroleum based is neither a lube oil nor grease and therefore not an excisable article. Moreover, it is not also an "aromatic extract" since the term aromatic extract means extract derived from aromatic materials produced by solvent extraction using N-methylpyrrolidienone, phenol, or furfural which are common solvents and includes BTX (benzene, toluene, xylene) from naphtha fractions used for chemical manufacture, upgrading middle distillates such as kerosene, diesel and jet fuel. (Section 2 (f) Revenue Regulations No. 7-90) Furthermore, as certified to by the Basic Chemical Group, a Division of Exxon Corporation, P.O. Box 3272, Houston, Texas 7723G-3272 and Chevron Chemical Company, 301 McKinney St., Houston, Texas, carbon black feedstock oil is a derivative of the crude oil refining process and is primarily a feedstock to the carbon black industry or the bottoms product of petroleum refinery operations. Finally, carbon black feedstock oil although it has the properties of a petroleum based products similar to bunker fuel and with a heating range of bunker fuel as shown by the test report of your sample dated December 6, 1990 by the Industrial Technology Development Institute (formerly the National Institute of Science and Technology) it is not considered as "similar fuel oil" under Section 145 (b) (3) of the Tax Code, as amended, since carbon black feedstock oil to be classified as feedstock (bunker) it must be used in the manufacture of excisable article and forming part thereof" (Section 145 (1) Tax Code, as amended) which is not the case of carbon black feedstock oil. Carbon black feedstock oil although petroleum based is used in the production of carbon black a non-excisable petroleum product. In view thereof, you are subject only to the 10% value-added tax under Section 101 (a) of the Tax Code, as amended. This revokes B.I.R. Ruling dated October 9, 1990. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner