9911796707
TMI Blog2016 (8) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... ee orders, passed by the assessing officer, appellate authority and revisional authority. The petitioner is also seeking a declaration that the oxygen gas used by Tata Steel Ltd., which is being supplied by this petitioner for the purposes of manufacturing of steel through basic oxygen steel method (a method of steel making) is a raw material, required directly for use in manufacturing or processing of steel. Factual matrix: This petitioner who was previously known as B. O. C. India Ltd. is supplying oxygen gas to respondent No. 11 M/s. Tata Steel Ltd. This oxygen gas, if used as a material in manufacturing process of steel, the petitioner has to pay three per cent. of sales tax on the sale price of oxygen and if this oxygen which is sold by this petitioner to M/s. Tata Steel Ltd. is used as one of the raw materials in manufacturing process of steel then the rate of sales tax will be two per cent. of the sale price of oxygen and this was the bone of contention in the previous round of litigation, which has reached up to the honourable Supreme Court and now in this writ petition the issue involved is whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, but, the oxygen which is mentioned in annexure B, simply states that it is one of the materials or goods, used in steel manufacturing process. The aforesaid decision was challenged by the petitioner before honourable Supreme Court in Civil Appeal No. 1538 of 2009. Similarly Tata Steel Ltd. had also challenged the aforesaid decision before the honourable Supreme Court in Civil Appeal No. 1540 of 2009. Both these appeals were decided by the honourable Supreme Court vide common order dated March 5, 2009. So far as locus standi is concerned, it is permitted to this petitioner as per para Nos. 22 and 23 to the judgment reported in [2009] 21 VST 490 (SC); [2009] 15 SCC 590 (BOC India Ltd. v. State of Jharkhand) and so far as second point on which the writ petition was dismissed by this court, which is reported in [2009] 21 VST 475 (Jharkhand); [2008] 1 JCR 473 (Jhr) (B. O. C. India Ltd. v. State of Jharkhand), it has been pointed out by the honourable Supreme Court at paragraph No. 37 that whether oxygen is a raw material or not in manufacturing process of steel, shall be decided by the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer upon the detailed report, given by the Committee comprising of six officers, as stated herein above, who visited the manufacturing place on February 4, 2010 (annexure A to the affidavit filed by the respondent State) The order passed by the assessing officer Deputy Commissioner of Commercial Taxes, Jamshedpur Circle, Jamshedpur, is under section 17 of the Bihar Finance Act, 1981. Against the aforesaid order, this petitioner has preferred an appeal under section 45 of the Bihar Finance Act, 1981 before the Joint Commissioner of Commercial Taxes (Appeals), Jamshedpur Division, Jamshedpur bearing Appeal No. J. R. VAT A 70 of 2011-12, which was dismissed by the appellate authority vide order dated June 7, 2013. Being aggrieved and dissatisfied with the appellate order, this petitioner has preferred a revision application under section 46 of the Bihar Finance Act, 1981 before the Commercial Taxes Tribunal, Ranchi being Revision Case No. 132 of 2013, which also was dismissed vide order dated March 30, 2015. Being aggrieved with all the three orders, i.e., the orders passed by assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said committee, oxygen is used as basic raw material without which steel cannot be manufactured. It is submitted by counsel for the petitioner in detail that what is the manufacturing process of steel and what is the use of oxygen in that process has also been mentioned in the report given by the Committee constituted by assessing officer who had visited the place of manufacturing. The detailed report is given by the committee dated April 26, 2010. The petitioner has sold oxygen worth Rs. 1,29,38,04,612 (one hundred twenty nine crores, thirty eight lacs, four thousand six hundred and twelve) to respondent No. 11 in the year 200304. Several annexures and several materials have been referred to by the counsel for the petitioner, including text books, which speak about the use of oxygen in manufacturing of steel through BOS method and it is submitted by counsel for the petitioner that looking to the notification dated February 3, 1986 bearing SO No. 154, if the oxygen is used as a raw material directly in the manufacturing process of the steel through BOS method, the petitioner is liable to make payment & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Monoxide (CO) and/or Carbon Dioxide (CO2). It is submitted by counsel for the petitioner that merely because oxygen gas is injected in last chain reaction, it cannot be labelled as "refining agent"-a terminology used in the report given by the aforesaid committee and the terminology as used by all the authorities under the Bihar Finance Act, 1981. Counsel for the petitioner submitted that whatever may be the nomenclature given by the respondents to the oxygen, but, the fact remains that it is inevitably used in the manufacturing process of steel, and, there fore, it is a basic raw material, without usage of which, desired end product-"steel" cannot be manufactured. Oxygen is such a basic raw material that no steel can be manufactured without usage thereof through B. O. S. method. Pig iron having approximately four per cent. of carbon content has to have a chemical reaction with oxygen gas, in the B. O. S. method and, therefore, oxygen gas is injected with high pressure injectors. The Government of Jharkhand cannot replace oxygen with any other element from the whole periodic table and the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on cannot be filed. The respondents State authorities should appreciate the manufacturing process of steel through BOS method and not a mistaken declaration or declaration made by inadvertence. This argu ment of the State has already been canvassed in the earlier round of litigation and has been dealt with by the honourable Supreme Court while deciding the case of this writ petitioner, as reported in [2009] 21 VST 490 (SC); [2009] 15 SCC 590 (BOC India Ltd. v. State of Jharkhand), especially in paragraph Nos. 29 and 32 thereof. In this matter also, the respondents have raised some objections and the counsel for the petitioner has placed reliance on para Nos. 29 and 32 of the aforesaid decision that a mistaken declaration has got no value and tax liability cannot be imposed upon a mistaken declaration by the assessee. Counsel for the petitioner has also submitted that if the Mass Balance Equation for manufacturing of the steel is seen, it will reveal that huge quantity of oxygen is being utilized for manufacturing of steel through BOS method. Generally catalyst is used in a very small quantity and it never reacts by itself. It remains as it is even after completio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for manufacturing of steel through BOS method and, therefore, all the essentials, enumerated in the notification bearing S. O. No. 154, dated February 3, 1986 have been fulfilled and, hence, sales tax leviable is only at the rate of two per cent. and not at three per cent. Arguments canvassed by counsel for respondent No. 11M/s. Tata Steel Ltd. Counsel for respondent No. 11 has submitted that oxygen purchased by Tata Steel Ltd. through this petitioner is certainly used as a basic raw material for manufacturing of steel through BOS method. Oxygen has been purchased in huge quantity, i.e., 449,438,281 Nm3. Counsel for respondent No. 11 further pointed out the whole manufacturing process followed by respondent No. 11 and submitted that merely because oxygen is added at a later stage of manufacturing process, it does not mean that it is simply "goods used in manufacturing process, namely, steel". Even if oxygen is added in the last chain of reaction for manufacturing of desired end-product namely, steel, the use of oxygen is inevitable. This characteristic makes oxygen, even though used in a last chain of reactions, a basic raw materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are used in manufacturing of steel are not the raw materials and, therefore, the benefit of notification bearing S. O. No. 154, dated February 3, 1986 cannot be given to this petitioner. Counsel for the respondent State submitted that, in fact, the aforesaid notification is last in number, but, if the notification dated December 15, 1976 is seen, the words "goods required directly for use in manufacturing" have been utilized in the said notification. Thereafter, there is a change in the wordings of the said notification in the subsequent Notification bearing S. O. No. 1096, dated September 9, 1983 and lastly the wordings were changed in Notification bearing S. O. No. 154, dated February 3, 1986. These aspects of the matter have been properly appreciated by the authorities under the Bihar Finance Act, 1981. It is submitted by counsel for the respondent State that oxygen is used as a goods, required directly for use in manufacturing of steel through BOS method. Oxygen gas is not used as a basic raw material for the manufacturing of steel through BOS method. These words which are used in notification dated Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y goods used in manufacturing process is raw material, then the sales tax leviable upon said goods will be only two per cent. In the facts of the present case, oxygen is used only as a refining agent, to reduce the carbon contents and that too at the fag end of the reaction, which makes oxygen only goods used in manufacturing process and, thus, it cannot be said that oxygen is used as a raw material in manufacturing process of steel and, hence, this writ petition may not be entertain by this court. Counsel for the respondents has also relied upon Form No. 23 which is used for getting form No. C under the Central Sales Tax Act, for levy of concessional rate of Central sales tax and in the said Act it has been mentioned that for manufacturing of steel, oxygen is not a raw material. This aspect of the matter has been referred to by the counsel for the State at annexure 8 to the counter affidavit, filed by the State authority. It is submitted by State authority that in subsequent assessment years oxygen has been treated as raw material in the new provision enacted under the Value Added Tax Act, 2005, especially u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used other than raw materials in the manufacturing process, it will fetch three per cent. of sales tax upon the sale of such item, whereas if any goods is used as a raw material in manufacturing process, the sale thereof will fetch two per cent. of the sales tax under section 13(1)(b) of the Act, 1981 to be read with the aforesaid notification. It is submitted by counsel for the petitioner that oxygen gas sold by the petitioner to respondent No. 11M/s. Tata Steel Ltd. is a raw material, directly used in manufacturing process of steel through BOS method. The quantity of oxygen gas sold by the petitioner to respondent No. 11 is very huge, which is for the year 200304. This petitioner has sold oxygen gas for total value of approximately Rs. 1,293,804,612.70 k.g. of oxygen is required for manufacturing of 1000 k.g. of steel whereas it is a major contention of the State that oxygen may be one of the goods, directly used in manufacturing process of steel, but, it is not a raw material for manufacturing of steel and, therefore, sale of oxygen will fetch three per cent. of sales tax. (iii) Previously als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for cash or for deferred payment or for commission, remuneration or other valuable consideration. It is an assessee. It, even as an agent of the State, is bound to collect taxes on the State's behalf and deposit the same in accordance with law. Noncompliance therewith would lead to penal actions. Even in the demand made by the Deputy Commissioner, Commercial Taxes, Jamshedpur Circle, Jamshedpur dated July 22, 2005, it was threatened with proceedings for recovery of the differential amount unless it produced the evidence of deposit thereof. Thus, a demand has been made on BOC. Hence, the opinion of the High Court that it did not have any locus standi to maintain the writ application cannot be accepted. 21. It may be true that the consumer of oxygen gas is TISCO. It was also entitled to purchase the said goods at a concessional rate. If the material is used for manufacture, the rate of tax is three per cent. whereas if the material is used as raw material for processing and/or manufacturing of the endproduct, indisputably, the rate of tax would be two per cent. Ultimately, BOC may be entitled to recover the dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n raised by the assessing authority. 32. For the selfsame reasons, we are of the opinion, that it is not necessary to go into the question as to whether a person even if he proves that he inadvertently did not claim the benefit of a notification would depend upon the facts and circumstances of each case as no such rule in absolute terms can be laid down therefor. We may, however, notice that this court in Share Medical Care v. Union of India [2007] 4 SCC 573 has opined as under (SCC page 577, para 15): '15. From the above decisions, it is clear that even if an applicant does not claim benefit under a particular notification as the initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage.' 33. For the reasons aforementioned, the impugned judgment can not be sustained. It is set aside accordingly. The appeals are allowed. The demand made on the appellant is also set aside. The question, as to whether 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s court will narrate from the documents on record what is the manufacturing process of steel through BOS method. (viii) Narration of manufacturing process of steel through BOS method: Before we narrate the manufacturing of steel through BOS method, it ought to be kept in mind that manufacturing process may take place through more than one chemical reaction. Iron ore (hematite) is not available in its pure form in the nature. It is always available in compound form, known also as oxides. These oxides are containing several other impurities. Iron ore is mainly known as Fe203. There are other oxides also. Oxygen has to be removed at the initial stage, which is known as "reduction process", for which a blast furnace is required. This blast furnace is charged with coke, iron ore, etc., and the hot air along with low pressure pure oxygen is injected therein for preparation of hot metal. But, this iron ore has more percentage of carbon. The molten iron obtained through first chemical reaction in blast furnace is known as reduction of iron ore, but, still, steel is not manufactured and what is manufactured is pig iron, hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thod. This is the importance of usage of oxygen in second reaction of manufacturing process, which is also known as L. D. Vessel Operation. (xi) Thus, oxygen is used in a very huge and large quantity in second chemical reaction for manufacturing of steel through BOS method. Moreover, usage of oxygen is inevitable. The usage of oxygen is not replaceable by any other element. The usage of oxygen is must in second chemical reaction, for manufacturing of steel which is also known as L. D. Vessel Operation. The function of oxygen in second chemical reaction is to convert pig iron into steel, by reducing the percentage of carbon by converting carbon into carbondi-oxide (CO2) and carbon monoxide (CO). Merely because oxygen is reducing the percentage of carbon, it cannot be labelled by the State of Jharkhand that oxygen is used only as "refining agent". Looking to the orders passed by the assessing officer, appellate authority and revisional authority-Commercial Taxes Tribunal, it appears that they all have narrated use of oxygen as "refining agent" as per the terminology, which the committee has used in its report dated Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast furnace" what is added is iron ore, coke, silicon and flux and hot air with low pressure of pure oxygen. All these are injected in blast furnace. Iron ore is normally iron oxides, i.e., Fe2O3. In this blast furnace reduction takes place. There are a very complex chemical reactions in this blast furnace. Several other oxides are also reduced with which we are not concerned. Thus, in a blast furnace, added raw materials are, iron ore, coke, etc., but these are not the only raw materials. Second stage of manufacturing process of steel, is yet to come. (d) In second stage of reaction for manufacturing of steel, through BOS method, what is obtained from blast furnace (known as "molten iron-pig iron") will now have further reaction in "L. D. Vessel Operation". Here again there will be another type of furnace. Here huge quantity of oxygen is being utilized as a raw material. This oxygen has to be added in L. D. Vessel Operation and that too in a huge quantity. In second chemical reaction pig iron will be normally in semi liquid state for any effective reaction with the oxygen gas in L. D. Vessel. It is injected with high pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the State authority that what is added in the second reaction, i.e., in L. D. Vessel Operation is not for only one purpose. Oxygen injected through high pressure not only reduces the percentage of carbon from pig iron, but, it also generates heat which is also must in L. D. Vessel Operation. There are several other impurities in pig iron. The multipurpose use of oxygen is to react with pig iron and to give steel. One of the usages of oxygen is to reduce the percentage of carbon. All the authorities under the Bihar Finance Act, 1981 have looked at the usage of oxygen only for one purpose, i.e., reduction of carbon percentage. This is an error apparent on the face of the record. Even otherwise also, if refining agent is used in large quantity and its use is inevitable and non replaceable, in such circumstances, even the refining agent is a basic raw material. "Raw material" and "refining agent" are not mutually exclusives nor they are opposites to each other, i.e., if a refining agent is used, it cannot be labelled as a raw material and if the raw material is used it cannot be labelled as a refining agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp;chemical reactions this ingredient is consumed and burnt up. The expression 'raw material' is not a defined term. The meaning to be given to it is the ordinary and well accepted connotation in the common parlance of those who deal with the matter. 14. The ingredients used in the chemical technology of manufac ture of any end-product might comprise, amongst others, of those which may retain their dominant individual identity and character throughout the process and also in the endproduct; those which , as a result of interaction with other chemicals or ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end-product; those which, like catalytic agents, while influencing and accelerating the chemical reactions, however, may themselves remain uninfluenced and unaltered and remain independent of and outside the end-products and those, as here, which might be burnt up or consumed in the chemical reactions. The question in the present case is whether the ingredients of the last mentioned class qualify themselves as and are eligible to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose. It generates enough heat in chemical reaction, without which the reaction is not possible, at all. This cannot be done in absence of usage of oxygen. There are other impurities also with the pig iron and oxygen is the only element, which can remove these impurities from pig iron and, therefore, wrongly it has been narrated and labelled by the respondent-State authorities as a "refining agent" and, therefore, it is not "a raw material". This logic is not accepted by this court. As stated herein above, both these terms are not mutually exclusive or opposites to each other. Even "a refining agent" can also be "a raw material" if the aforesaid criteria are fulfilled, as stated in para (xiii), in detail. (xv) It has been contended by counsel for the respondent-State that under the Central Sales Tax Act for giving benefit of Form C, etc., it has been mentioned that in steel manufacturing process the raw materials are coke, hematite, i.e., iron ore, etc., and oxygen is not referred to as raw material and, therefore, in the facts of the present case also, the oxygen cannot be treated as a raw material. The above contention i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by Tata Steel Ltd., it would not have needed oxygen, at all and further it has been submitted by counsel for respondent Nos. 1 to 10 that raw material is common in all the methods, which is indispensable, irrespective of change of method of manufacturing. It is submitted by counsel for respondent No. 11 M/s. Tata Steel Ltd. that State Government cannot sit over the chair of Directors of M/s. Tata Steel Ltd. and direct Tata Steel Ltd. which method should be adopted for manufacturing of steel. The contention raised by the State, i.e., respondent Nos. 1 to 10 is also not accepted by this court, mainly for the following reasons: (a) What would be the methodology of manufacturing of steel is always left at the discretion of the manufacturer; (b) Here the steel is being manufactured by Tata Steel Ltd. through BOS method and the same cannot be changed by the State Government. (c) What is to be seen by this court and by all the authorities is whether in manufacturing process selected by the manufacturer, the use of oxygen is inevitable or not ? Whether the use of oxygen is replaceable or not ? Whether oxygen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefit of section 13(1)(b) of the Bihar Finance Act, 1981 to be read with Notification bearing S. O. No. 154, dated February 3, 1986. (xviii) Counsel for the StateRespondent Nos. 1 to 10 has submitted that to check whether oxygen is used in BOS method as a raw material or not, this court has to look at the raw materials used in common parlance and, therefore, oxygen is not a raw material in the facts of the present case. This contention of the State is not accepted mainly for the following reasons: (a) It has been held by the honourable Supreme Court in the case of BOC India Ltd. v. State of Jharkhand as reported in [2009] 21 VST 490 (SC); [2009] 15 SCC 590, paragraph No. 24 whereof reads as under (paras 26 & 27, page 501 in 21 VST): "24. The expression 'raw material' is not defined. It has to be given its meaning as is understood in the common parlance of those who deal with the matter. Oxygen gas when used would admittedly be burnt up. Would it mean that it ceases to be a raw material is the question ?" (emphasis1 supplied) (b) Thus, in view of aforesaid paragraph No. 24 (paras 26 and 27 in &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents which is a demand notice dated October 10, 2011 (annexure 15) issued by Deputy Commissioner, Commercial Taxes, Jamshedpur Circle, Jamshedpur. We hold that oxygen gas sold by this petitioner and purchased by respondent No. 11 is used as a basic raw material in manufacturing process of steel through Basic Oxygen Steel Method. This writ petition is, thus, allowed and disposed of. The amount already deposited by respondent No. 11 which is a differential amount and was realized by respondent Nos. 1 to 10, shall be adjusted towards future tax liability of the petitioner or towards other financial liabilities of the petitioner. Similarly, if any amount has been realized by respondent Nos. 1 to 10 from any bank account of the petitioner, the same shall be adjusted towards the future tax liability or other financial liability of the petitioner and we hold that oxygen is a basic raw material and, therefore, the tax leviable shall be at the rate of two per cent. as per section 13(1)(b) of the Bihar Finance Act, 1981 read with Notification bearing S. O. 154, dated February 3, 1986. W. P. (T) No. 1939 of 2015 with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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