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TMI Blog2022 (12) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ty at 2% as the use of oxygen can be said to be a "raw material" for the purpose of end product of steel, the State of Jharkhand and other authorities have preferred the present appeals. 2. The facts leading to the present appeals in nutshell are as under: A certificate (Form VI-B) under Section 6 of the Bihar Finance Act, 1957 was issued in the name of erstwhile India Oxygen Limited, which was subsequently re-named as Linde India Limited. The State Government vide notification dated 12.04.1982 under Section 13(1)(b) of the Bihar Finance Act, 1981, notified a special rate of tax at 1% for "raw material inputs". However, the rate of tax for other than "raw material inputs" continued at 3%. A certificate (Form VI-B) under Section 8 of the Bihar Finance Act, 1981 was issued in the name of respondent No.2 herein - M/s Tata Iron and Steel Company (for short, 'Tata Steel'). As per Annexure-B of the certificate, "oxygen gas" was to be taxed at 3%, which respondent No.2 herein - Tata Steel continued to pay at 3%. 2.1 The State Government issued a fresh notification dated 9.9.1983 directing that the rate of tax payable under section 13(1)(b) on raw materials for use in the manufacture or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the carbon content as per requirement and as such oxygen gas is not a direct "raw material" of steel. The report also stated that the use of oxygen to reduce quantity of carbon from iron cannot be a ground to say that oxygen is a "raw material" of steel. Based on the inspection report dated 4.2.2010, the assessing officer issued notice to respondent No.1 dated 11.6.2010 seeking clarification as to why oxygen may not be considered to be a 'refining agent'. The assessing officer passed an order of assessment dated 1.10.2011 relating to financial years 2001-02, 2002-03, 2003-04, 2004-05 and 2005-06 holding that the oxygen is used as goods other than "raw material" in steel making and that it is a 'refining agent', 'reducing agent' and that 3% tax is to be levied on oxygen. On the basis of the order of assessment, the Deputy Commissioner, Commercial Taxes, Jamshedpur Circle issued a demand notice dated 10.10.2011against respondent No.1 - Linde India Limited. 2.4 Tata Steel assailed the assessment order by way of writ petition before the High Court. The High Court relegated the Tata Steel to file an appeal under Section 45 of the Bihar Finance Act, 1981. That thereafter, respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the oxygen used can be said to be a part of manufacturing process at the most while in any case it cannot be said to be a "raw material" for the purpose of manufacture of the end product - steel. 3.3 It is submitted that as observed and held by this Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M/s Thomas Stephen & Co. Ltd., (1988) 2 SCC 264, goods used for ancillary purposes like fuel in the process of the manufacture cannot be said to be "raw material" for manufacture of goods. 3.4 It is submitted that in the present case, the fact-finding committee consisting of experts submitted a detailed inspection report and it was specifically found that the oxygen gas is not a direct "raw material" of steel production and the work of oxygen is only a refining agent and its main function is to reduce carbon content as per requirement and as such, oxygen gas is not a direct "raw material" of steel. It is submitted therefore that once that is the position, 'oxygen gas' cannot be said to be a "raw material" in manufacture of the steel and therefore the rate of tax at 3% would be leviable. 3.5 It is submitted that in fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as come to the conclusion that use of the oxygen in steel making is as "raw material" and "raw material" is not anti-thesis to it being a "refining agent." That the High Court has rightly observed that it is a wrong notion in the mind of the authorities below that a 'refining agent' cannot be a "raw material." It is submitted that the High Court has rightly held that 'refining agent' can also be a "raw material", if it is indispensable, non-replaceable, used in large quantity, which is inevitable to be used. 4.4 It is submitted that the High Court, while holding so, has relied upon the principle laid down by this Court in the case of Collector of Central Excise, New Delhi v. Ballarpur Industries Limited, (1989) 4 SCC 566. It is submitted that in the case of Ballarpur Industries Limited (supra), the issue was, as to whether input of sodium sulphate used in the manufacture of paper would cease to be a raw material by reason alone of the fact that in the course of chemical reactions the ingredient is consumed and burnt up. In the said case, this Court laid down the test in paragraphs 13 & 14 about what constitute raw material in the absence of a definition in the statute and held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embly, whatsoever, nature does not arise. It is submitted that therefore the contention of the State qua notification dated 3.2.1986 is untenable. 4.9 Now so far as the contention of the State regarding declaration in Annexure B by Tata Steel is concerned, it is submitted that the said contention was earlier raised by the State in the first round of litigation between the parties, which culminated in the judgment of this court in the case of BOC India Limited (supra). It is submitted that in the said judgment, this Court had specifically overruled such an objection of the State which was based upon an inadvertent incorrect declaration. It is submitted that this Court noticed that there is no prohibition or estoppel in this regard and the matter is required to be considered independent of the same. 4.10 Shri S. Ganesh, learned Senior Advocate appearing on behalf of the respondents has submitted that the contention raised by the State that the oxygen is used as a 'refining agent' and not as a "raw material" may not be accepted for the following reasons, i) refining agents and raw materials are not mutually exclusive or opposite to each other. A particular product can be raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of the State in any manner. The said judgment had already been considered and distinguished by this Court in the case of Ballarpur Industries Limited (supra). 4.12 Making the above submissions and relying upon the decision of this Court in the case of Ballarpur Industries Limited (supra), it is prayed to dismiss the present appeals. 5. We have heard learned counsel for the respective parties at length. The short question which is posed for the consideration of this Court is, as to whether the oxygen gas supplied by respondent No.1 to respondent No.2 is used as "raw material" in the manufacturing process of steel, so as to entitle respondent No.1 to pay concessional rate of tax on the same under Section 13(1)(b) of the Bihar Finance Act, 1981. This may be noted that only in a case where oxygen gas is used as "raw material", the same would be taxed at the rate of 2% of the sales tax, which otherwise is chargeable @ 3% on the sale thereof. 5.1 One another question which may fell for consideration would be, whether in the facts and circumstances of the case and faced with a detailed inspection report pertaining to inspection and enquiry of respondent No.2 by a six members ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from this blast furnace, can stay up to 4%. More quantity of carbon, it is very hard and brittle. Other impurities (e.g., SP Si, Mg) are found mixed in molten iron. In order to refine it, M/s. Tata Steel uses pure oxygen in its L.D. converter. In the Steel Making Heading (Annexure A/4) of the documents submitted by M/s B.O.C., it is called Refining Process, and its main objective is to reduce carbon contents. The pure oxygen used in Refining process is called rawmaterial by M/s Tata Steel and M/s B.O.C. It is clear from the above mentioned facts that pure oxygen is not being used as raw-material in extraction of iron, and it is used in the Refining Process to increase the quality of production. Before considering whether the used oxygen is raw material or not, it is necessary to consider the various ingredients of steel. It is to be mentioned here that Steel is nothing but Alloys of Iron & Alloying is method of improving the properties of the material by adding meal or non-metal. Various alloys of iron are as given below: - Iron+ Carbon (.1 to 1.5%) =Steel Iron + Carbon + Chromium + Nickel = Stainless Steel = used for cycles, utensils, pens etc. Iron + Nickel + Alum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the Constitution of India is not sitting as an appellate court against the findings recorded on appreciation of facts and the evidence on record. The High Court ought to have appreciated that there was a detailed inspection report by a six members committee who after detailed enquiry and inspection and considering the process of manufacture of steel specifically came to the conclusion that the work of oxygen is only of a 'refining agent' and its main function is to reduce the carbon content as per the requirement. The said findings accepted by the assessing officer and confirmed up to the Joint Commissioner - Revisional Authority were not required to be interfered with by the High Court in exercise of powers under Article 226 of the Constitution. The High Court lacks the expertise on deciding the disputed questions and more particularly the technical aspect which could have been left to the Committee consisting of experts. 8. Even otherwise on merits also, in light of the findings recorded by the committee, accepted by the assessing officer and confirmed up to the Joint Commissioner - Revisional Authority, it is required to be considered, whether the oxygen gas used in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its absence the presence of the end product, as such, is rendered impossible. This quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus." At this stage, it is required to be noted that attention of this Court was also drawn to the decision of this Court in the case of Thomas Stephen & Co. Ltd. (supra) and in fact pressed into service on behalf of the revenue. However, the said decision came to be distinguished by this Court while observing in paragraph 15 as under: "15. The decision of this Court in Dy. CST v. Thomas Stephen & Co. Ltd. [(1988) 2 SCC 264, 267 para 9 : 9:8 SCC (Tax) 190 : JT (1988) 1 SC 631, 634] relied upon by Shri Ganguly, does not really advance the appellant's case. The observations therein to the effect that "consumption must be in the manufacture of raw material or of other component which go into the making of end product" (SCC p. 267, para 9) were made to emphasise the distinction between the "fuel" used for the kiln to impart the heat treatment to ceramics and what actually went into the manufacture of such ceramics. The observations, correctly apprehended, do n ..... 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