2009 (3) TMI 539 - SC - VAT and Sales Tax

Whether the ingredients of the last mentioned class qualify themselves as and are eligible to be called 'raw material' for the end-product? Held that - The appeals are allowed. As held even if an applicant does not claim benefit under a particular notification at the initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage. The demand made on the appellant is also set aside. The question as to whether the oxygen gas is a raw material for the manufacture of steel or not may be determined by the assessing authority on the basis of the material(s), which may be brought on record by the parties. All contentions raised by the parties on the said question shall remain open. The assessing authority is hereby directed to give an opportunity to the parties to adduce evidence in this behalf.

Issues Involved:
1. Locus Standi of BOC to file the writ petition.
2. Classification of oxygen gas as a raw material.
3. Compliance with procedural requirements under the Bihar Finance Act, 1981 and the Bihar Sales Tax Rules, 1983.
4. Validity of the demand notice for differential tax.

Issue-wise Detailed Analysis:

1. Locus Standi of BOC to File the Writ Petition:
The Supreme Court held that BOC, being the manufacturer and supplier of oxygen gas, is a "dealer" under the Bihar Finance Act, 1981, and thus, has the requisite locus standi to maintain the writ application. The court noted that BOC is liable to collect and deposit taxes on behalf of the State and is subject to penal actions for non-compliance. The demand made by the Deputy Commissioner of Commercial Taxes on BOC for the differential tax amount substantiates BOC's standing as an aggrieved party.

2. Classification of Oxygen Gas as a Raw Material:
The court discussed whether oxygen gas used in steel manufacturing qualifies as a "raw material." The term "raw material" is not defined in the Act and must be understood in common parlance. The court referenced previous judgments, including *Collector of Central Excise, New Delhi v. Ballarpur Industries Ltd.* and *Tata Engineering & Locomotive Company Ltd. v. State of Bihar*, which held that materials consumed in the manufacturing process can still be considered raw materials. However, the court emphasized that determining whether oxygen gas is a raw material is a factual question requiring evidence, which should be adjudicated by the assessing authority.

3. Compliance with Procedural Requirements:
The court highlighted that TISCO did not apply for an amendment or modification of its registration certificate to reflect oxygen gas as a raw material eligible for a lower tax rate. The procedural requirements under Sections 13(1)(b), 14(2), and 54 of the Act and Rules 3(9), 6(1)(b), and 6(4) of the Bihar Sales Tax Rules, 1983, were not followed by TISCO. The court noted that compliance with these procedural requirements is mandatory for claiming the benefit of a concessional tax rate.

4. Validity of the Demand Notice for Differential Tax:
The court found that the demand notice issued to BOC for the differential tax amount was based on the fact that TISCO had not amended its registration certificate to reflect oxygen gas as a raw material. The High Court's dismissal of the writ petition was based on the premise that BOC lacked locus standi and that TISCO was liable to pay tax at the concessional rate of three percent, not two percent. The Supreme Court set aside the High Court's judgment, directing the assessing authority to determine whether oxygen gas is a raw material based on evidence presented by the parties.

Conclusion:
The Supreme Court allowed the appeals, setting aside the demand made on BOC and remanding the matter to the assessing authority to determine whether oxygen gas is a raw material for steel manufacturing based on evidence. The court emphasized the need for procedural compliance under the Act and Rules and directed the assessing authority to provide the parties an opportunity to present evidence on the matter.

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