State of Jharkhand and Others v. Linde India Limited and Another
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned common
judgment and order dated 03.08.2015 passed by the High Court of
Jharkhand at Ranchi in Writ Petition Nos. 1929 of 2015 and other allied
writ petitions, preferred by the respondents, by which the H igh Court
has allowed the said writ petitions and has quashed and set as ide the
order dated 30.03.2015 passed by the Commercial Taxes Tribunal, Ranchi
and has also interfered with the concurrent findings of fact recorded by
the three authorities and has also quashed the demand notice, h olding
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA
LIMITED AND ANOTHER
that the respondents are entitled to benefit of concessional rate of duty
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 Fi nance
Act, 1957 was issued in the name of erstwhile India Oxygen Limit ed,
which was subsequently re-named as Linde India Limited. The S tate
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 t han “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 processing of goods for sale in
the State or in course of Inter-State trade or commerce excluding such
raw materials which have already undergone any manufactur ing or
production process and which are required for further assembly, shall be
at the rate of 2%. Vide notification dated 3.2.1986, the State Government
deleted the term “or in the course of interstate trade or com merce”.
2.2 Respondent No.1 herein, who is a manufacturer of pure oxygen
sold the oxygen to respondent No.2 – Tata Steel. Respondent No.1 raised
a dispute with respect to the rate of concessional rate of tax. According
to respondent No.1, the pure oxygen sold to respondent No.2 – Tata
Steel was used as a “raw material” in production of steel through basic
oxygen steelmaking (BOS method). The Assessing Authority disputed
the sale of oxygen by respondent No.1 in favour of respondent No.2 at
2% on the ground that such sale is not of “raw material” but of goods
other than raw materials and as such the concession al rate of tax
applicable to such sale under Section 13(1)(b) would be 3%, rather than
2%.
2.3 In a writ petition preferred by respondent No.1, the High Court
of Jharkhand dismissed Writ Petition No. 4963/2005 by holding that
863
respondent No.1 has no locus to file the writ petition as the tax was
payable by respondent No.2 – Tata Steel, who is the purchaser of oxygen
produced by respondent No.1. The judgment and order passed by the
High Court was the subject matter of Civil Appeal Nos. 1538/2009 and
1540/2009 before this Court. The said appeals came to be allo wed by
this Court vide reported judgment and order in the case of BOC India
Limited v. State of Jharkhand and Others, (2009) 15 SCC 590 . This
Court remanded the matter to hold an enquiry and consider, whether the
oxygen sold by respondent No.1 to respondent No.2 can be said to be
“raw material” for the manufacture of steel. The matter c ame to be
remanded to the assessing authority. That thereafter, a six member
committee was constituted to enquire into whether the pure oxygen sold
can be said to be “raw material”. A detailed inspection report pertaining
to inspection and inquiry of Tata Steel, by a six member committee, was
submitted and it was found that ‘oxygen gas’ is not a direct “raw material”
of steel production and the work of oxygen is only of a refining agent. It
was opined that the main function of the oxygen is to reduce 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 a ssessment
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, Commercia l Taxes,
Jamshedpur Circle issued a demand notice dated 10.10.2011a gainst
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, 1 981. That
thereafter, respondent No.1 – Linde India Limited filed an appeal under
Section 45 of the Bihar Finance Act, 1981 before the Joint Commissioner,
Commercial Taxes (Appeals). The Joint Commissioner dismiss ed the
said appeal vide order dated 7.6.2013. Revision application came to be
dismissed against the order passed by the first appellate authority, by
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA
LIMITED AND ANOTHER [M. R. SHAH, J.]
order dated 30.03.2015. The order passed by the revisional authority
was the subject matter of present writ petition before the High Court.
By the impugned common judgment and order, the High Court has
allowed the said writ petition and set aside the orders passed by all the
authorities below, holding that as the function of the oxygen is to convert
pig iron into steel by reducing the percentage of carbon dioxi de by
converting it to carbon monoxide which is necessary for the purpose of
manufacture of the end product – steel and therefore the oxygen can be
said to be a “raw material” and therefore respondent No.1 is entitled to
concessional rate of tax at 2%. The impugned common judgment and
order passed by the High Court is the subject matter of present appeals.
3. Shri Arunabh Chowdhury, learned Senior Advocate appearing
on behalf of the appellants – State of Jharkhand has vehemently submitted
that in the facts and circumstances of the case, the High Cou rt has
seriously erred in interfering with the concurrent findings recorded by all
the three authorities below, while exercising the powers unde r Article
226 of the Constitution of India.
3.1 It is submitted that the findings recorded by all the authorities
below that oxygen can be said to be a ‘refining agent’ and its main role
is to reduce carbon content up to the desired level and therefor e the
oxygen does not fall in the category of other goods used in the
manufacturing process of steel and considering the detailed inspection
report given by a six member committee, the findings recorded by all the
authorities below were not required to be interfered with by the High
Court in exercise of powers under Article 226 of the Constituti on of
India. Reliance is placed on the decision of this Court in t he case of
State Bank of India v. K.S. Vishwanath, 2022 SCC OnLine SC 667.
3.2 It is submitted that even otherwise on merits also, the oxygen
sold by respondent No.1 to respondent No.2 – Tata Steel cannot be said
to be “raw material” for the purpose of manufacture of steel. It is
vehemently submitted 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., (19 88) 2
SCC 264, goods used for ancillary purposes like fuel in the process of
865
the manufacture cannot be said to be “raw material” for manufacture of
goods.
3.4 It is submitted that in the present case, the f act-finding
committee consisting of experts submitted a detailed inspection report
and it was specifically found that the oxygen gas is not a dire ct “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 ste el. It is
submitted therefore that once that is the position, ‘oxygen ga s’ 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 the 3% tax was pai d by the
respondents on the pure oxygen till the bifurcation of the State of Bihar
into State of Bihar and State of Jharkhand and no dispute at any point of
time was raised by the respondents. The respondents continued to pay
the rate of tax at 3%. However, a dispute was raised only w hen the
State of Jharkhand came into existence and they demanded the rate of
tax at 3%.
3.6 Making the above submissions and relying upon the aforesaid
decisions, it is prayed to allow the present appeals and quas h and set
aside the impugned common order passed by the High Court.
4. The present appeal is vehemently opposed by Shri S. Ganesh,
learned Senior Advocate appearing on behalf of the respondents – Linde
India Limited & Tata Steel.
4.1 Shri S. Ganesh, learned Senior Advocate appearing on behalf
of the respondents has submitted that the issue involved in the present
appeals is, as to whether the oxygen gas supplied by responde nt No.1
(Linde India Limited) to respondent No.2 (Tata Steel) is used as a “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 (as applicable to the State of Jharkhand).
It is submitted that if the oxygen gas is used as a “raw ma terial”, the
same would be taxed @ 2% of sales tax, which is otherwise chargeable
@ 3% on sale thereof.
4.2 It is submitted that the oxygen supplied by Linde India Limited
to Tata Steel is directly used by Tata Steel in the manu facture of steel
making and therefore the same is “raw material” and con sequently
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA
LIMITED AND ANOTHER [M. R. SHAH, J.]
entitled to the benefit of concessional rate of tax under Section 13(1)(b)
of the Bihar Finance Act, 1981, r/w applicable notification, adopted in
the State of Jharkhand.
4.3 It is submitted that the High Court in its impugned judgment
has in great detail noted the process of manufacture of stee l by Tata
Steel, which is called Basic Oxygen Steel Method (BOS method). It is
submitted that the High Court has noted the two stages of operation, the
first being operation in blast furnace and second being operation in L D
vessel. It is submitted that the High Court has described them as chemical
reaction no.1 and chemical reaction no. 2. The High Court has al so
noted the use of the oxygen in both the stages in both the operations. It
is submitted that thereafter the High Court has come to the conclusion
that use of the oxygen in steel making is as “raw mat erial” 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 m ind 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 Lim ited, (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 m aterial by
reason alone of the fact that in the course of chemical re actions the
ingredient is consumed and burnt up. In the said case, this Cou rt laid
down the test in paragraphs 13 & 14 about what constitute raw material
in the absence of a definition in the statute and held that the same would
be as per common parlance of the people who deal with the matter. It is
submitted that in the aforesaid decision, it is further observed and held
that the stage of manufacture is not decisive about the use of “raw
material.”
4.5 It is further submitted that as such the State of Jharkhand has
admitted before the High Court that oxygen is used in the manufacture
process of steel. However, it is case of the State that the oxygen is used
as a ‘refining agent’ and not as a “raw material.” It is submitted that the
same has been rightly rejected by the High Court, by the imp ugned
judgment and order.
867
4.6 It is submitted that the manufacturing process for making steel
adopted by Tata Steel is known as BOS method. It is submitted that the
method by which the steel is made is the Basic Oxygen Steel Method,
obviously enough, steel cannot be made without oxygen. If that is so, it is
but obvious that the oxygen is “raw material” used in this method for
manufacturing steel. It is submitted that in other words, but for oxygen,
the steel cannot be manufactured.
4.7 Now so far as the submission on behalf of the State th at the
assessee is not entitled to the benefit of exemption notifi cation dated
3.2.1986 bearing SO No. 154 is concerned, it is submitted that such a
contention was never raised earlier by the State and such a contention is
being raised for the first time before this Court and the refore such a
contention ought not to be allowed to be raised for the first time before
this Court.
4.8 It is submitted that even if such a contention is to be considered,
the same is stated to be rejected in view of the fact that the notification
in question only excludes such raw materials which hav e already
undergone any manufacturing or production process and which are
required for further assembly. It is submitted that the condition of exclusion
clause in the notification is cumulative in nature and unless the excluded
raw material, which is manufactured or processed is used for assembly,
the exclusion clause will not be triggered. It is submitt ed that in the
present case, Linde India Limited has manufactured/pro duced pure
oxygen but the same is not used for any assembly by Tata Steel. The
use of oxygen is well documented on record and well describ ed and
considered in the impugned judgment. It is submitted that therefore the
question of use of oxygen in any assembly, 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 declarati on. 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.
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA
LIMITED AND ANOTHER [M. R. SHAH, J.]
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 mutuall y exclusive
or opposite to each other. A particular product can be raw
material, even if it is also a refining agent;
ii) in order to find out whether a particular product is raw
material, the test is the indispensability of the said product
in the manufacturing process. If the end product cannot be
manufactured without the use of a particular product, the
same would definitely constitute a raw material;
iii) the importance of the product used as a raw material is to
be seen. The importance of the product lies in the fact not
in its absence in the end product but its presence at t he
delivery end of the process;
iv) the quantity of the raw material used is also signific ant
inasmuch as for manufacturing 1000kg of steel, 70kg of
oxygen is required. This by no means is insignificant quantity;
v) irreplaceability of the raw material is to be considered. In
the present case, as rightly noted by the High Court in i ts
impugned judgment, the use of the oxygen gas cannot be
replaced by any other element from the periodic table of
elements;
vi) the use of raw material is to be noticed. The function of the
oxygen in the present case is to reduce the percentage of
carbon, so as to make steel from pig iron. Higher the
percentage of carbon in pig iron, the farther it is from steel.
The reduction of percentage of carbon from the pig iron
converts pig iron into steel;
vii) the function of the raw material itself. In the prese nt case,
the raw material is not only changing pig iron into steel, it
itself is getting converted into carbon dioxide and carbon
monoxide. Does the function of oxygen is not merely to act
as catalyst but it itself is participating in the chemical reaction
in the manufacturing process; and
869
viii) the application of the raw material. In the present c ase,
the oxygen is injected with high pressure so that the oxygen
gas penetrates the semi liquid material, i.e., pig iron, out of
which steel is manufactured.
It is submitted that therefore the use of the oxygen in the present
case is “raw material” and the respondents are enti tled to the
concessional rate of tax at 2% on purchase of oxygen by Tata St eel
from Linde India Limited as the same is being used as “raw material”.
4.11 Now so far as the reliance placed upon the decision of thi s
Court in the case of Thomas Stephen & Co. Ltd. (supra), relied upon
by the learned counsel on behalf of the State is concerned, it is submitted
that the said judgment does not advance the 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 partie s 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 a s “raw
material”, the same would be taxed at the rate of 2% of the s ales 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 expert committee, u pon which
reliance was placed by the assessing officer holding that oxygen gas is
a ‘refining agent’, confirmed up to the revisional authority, was it open
for the High Court to upset the concurrent findings recorded by all the
three authorities below, while exercising powers under Article 226 of
the Constitution?
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA
LIMITED AND ANOTHER [M. R. SHAH, J.]
6. At the outset, it is required to be noted that pursuant t o the
earlier order passed by this Court, the matter was remanded to consider
the question, as to whether oxygen gas is a “raw materi al” for the
manufacture of the steel. That thereafter on remand, an inspection and
enquiry was carried out by a six members expert commi ttee who
submitted a detailed report wherein it was found that the ‘oxygen gas’ is
not a direct ‘raw material” of steel product and the work of the oxygen
gas is only of a ‘refining agent.’ As per the report, the function of the
oxygen is to reduce the carbon content as per the requirement and t he
same is not a direct “raw material” of steel. By subm itting a detailed
report and after considering the relevant documents/literature produced
by respondent Nos. 1 & 2, the Committee considered the detailed process
for manufacture of steel and the function of the oxygen gas used. The
Committee also considered the entire process of steel m anufacturing.
That thereafter it was concluded that the oxygen gas used is onl y a
‘refining agent’ and the main function of it is to reduce the carbon content
as per the requirement and therefore the oxygen gas cannot be sa id to
be a direct “raw material” of steel. While holding so, t he Committee
analysed as under:
“In order to understand this case well, it is necessary to discuss
extraction of iron from its ore and alloying first. At the outset, M/
s Tata Steel Ltd. causes a hot air blast of iron ore (oxide of iron)
by mixing it with lime stone and coke in its blast furnace. Iron
oxide is reduced at various temperature ranges. Main objec tive
of this blasting is removing oxygen from iron ore. In this process,
oxygen is removed iron ore but quantity of carbon exceeds the
permissible range. The molten iron received from this furnace is
called pig iron. M/s Tata Steel does not require oxygen purchased
from M/s BOC till this stage. Lime stone is used in this furnace to
remove Silica Impurities and coke is used to remove oxygen from
iron ore.
Quantity of carbon in Molten Iron, received 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 Refin ing
Process, and its main objective is to reduce carbon contents. The
871
pure oxygen used in Refining process is called raw-material 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 materia l 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 mate rial
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 + Aluminum + Co= Alnico – for permanent magnet
Iron + Chromium = Chrom - used for cutting tools and crushing
machine.
Iron is not used in pure form because it is soft an d readily
stretchable upon heating, however, if 0.1 +1.5% carbon is mixed
in it, it becomes hard and strong and ready to use.
Here it is also to be noted that in this Refining Process, Slag (Sio2
P2 O5) is formed which is unwanted waste product because of
presence of oxygen in it and is not targeted product. Hence , on
this ground also, oxygen cannot be held constituents of its End
Product Steel.
It is necessary to see the following chemical reaction to understand
as to whether oxygen is raw-material of steel or not?
Electrolysis
2H2O (1) —————— 2H 2(g) + O 2(g)
It means, Electrolysis of water by passing current gives us
“Hydrogen & Oxygen”. To complete this Electrolysis process, it
is necessary to mix few drops of H 2SO4 (Sulfuric Acid). Thus,
H2SO4 (Sulfuric Acid) cannot be held raw-material of Hydrogen
or Oxygen only on this ground.
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA
LIMITED AND ANOTHER [M. R. SHAH, J.]
Similarly, use of Oxygen to reduce quantity of carbon from iron
cannot be a ground to say that oxygen is raw material of steel.
It is evident from the above mentioned facts that Oxygen used by
M/s Tata Steel is only a Refining Agent, the main function o f
which is to reduce carbon contents as per the requirements, which
means Oxygen is not a direct raw-material of steel. It is, of course,
used in the manufacturing of steel but it does not come under the
category of direct raw-material and is placed under the category
of other material used in this process.”
On the basis of the aforesaid inspection report by the committee
consisting of six expert members, the assessing offi cer passed an
assessment order holding that the respondents are n ot entitled to
concessional rate of tax at the rate of 2% and that 3% tax is to be levied
on oxygen. The findings of fact recorded by the assessing officer which
were based upon a detailed inspection report by a six members expert
committee came to be confirmed by the Deputy Commissi oner and
thereafter by the Joint Commissioner – Revisional Authority. The findings
of fact recorded by the three authorities below have been up set by the
High Court in exercise of powers under Article 226 of the Constitution
of India.
7. As per the settled position of law, the High Court in exercise of
powers under Article 226 of the Constitution of India is not sitting as an
appellate court against the findings recorded on appreciation o f 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 c onfirmed up
873
to the Joint Commissioner – Revisional Authority, it is req uired to be
considered, whether the oxygen gas used in the manufacture of processing
of goods, the same can be said to be a “raw material” for the manufacture
of the end product – steel.
9. The High Court as well as learned counsel appearing on behalf
of the respondents have heavily relied upon the decision of this Court in
the case of Ballarpur Industries Limited (supra) , more particularly
the observations made in paragraphs 13 & 14. In the case bef ore this
Court, the question was, whether the 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 this ingredient
is consumed and burnt up. While analysing the entire manufac turing
process, this Court opined in paragraph 14 that the sodium sulphate used
in the manufacture of paper can be said to be a “raw mat erial”. While
holding so, it was observed in paragraph 14 as under:
“14. The ingredients used in the chemical technology of
manufacture 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 end product;
those which, as a result of interaction with other chemicals or
ingredients, might themselves undergo chemical or qualitati ve
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 themse lves
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 called “raw material”
for the end product. One of the valid tests, in our opinion, could be
that the ingredient should be so essential from the ch emical
processes culminating in the emergence of the desired end product,
that having regard to its importance in and indispensability for the
process, it could be said that its very consumption on burning up is
its quality and value as raw material. In such a case, the relevant
test is not its absence in the end product, but the dependence of
the end product for its essential presence at the delivery e nd of
the process. The ingredient goes into the making of the end product
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA
LIMITED AND ANOTHER [M. R. SHAH, J.]
in the sense that without its absence the presence of t he end
product, as such, is rendered impossible. This quality sh ould
coalesce with the requirement that its utilisation is in the
manufacturing process as distinct from the manufact uring
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 ther ein to
the effect that “consumption must be in the manufacture of r aw
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
not lend themselves to the understanding that for something to
qualify itself as a “raw material” it must necessaril y and in all
cases go into, and be found, in the end product.”
As such, the decision of this Court in the case of Thomas Stephen
& Co. Ltd. (supra) has not been overruled by this Court in the case of
Ballarpur Industries Ltd. (supra) and therefore the decision of this
Court in the case of Thomas Stephen & Co. Ltd. (supra) still is a good
law. In the case of Thomas Stephen & Co. Ltd. (supra), it was a case
of fuel like in the present case which was used for the kiln to impart the
heat treatment to ceramics and what actually went into the manufacture
of such ceramics.
In the case of Thomas Stephen & Co. Ltd. (supra), the cashew
shells had been used as fuel in the kiln. It was found that cashew shells
did not get transformed into the end product. The same was not used as
raw material in the manufacture of the goods and it was foun d that
these have been used only as an aid in the manufacture of the goods by
the assessee. To that it was observed that consumption must be in the
manufacture as raw material or of other components which go into the
875
making of the end product. It was found that cashew shells do not tend
to the making of the end product. It was observed that goods used for
ancillary purposes like fuel in the process of the manufacture do not fall
within Section 5-A(1)(a) of the Kerala General Sales Tax Act, 1963 and
cannot be said to be used as a “raw material”.
10. Applying the law laid down by this Court in the case of Thomas
Stephen & Co. Ltd. (supra) to the facts of the case on hand and the
findings by the committee consisting of six expert members recorded in
the detailed inspection report and when it has been found that the oxygen
gas is used as a ‘refining agent’ and its main function is to reduce the
carbon content as per the requirement, the oxygen gas cannot be said to
be a “raw material” used in the manufacture of the end product – steel.
Under the circumstances, the respondents are not en titled to the
concessional rate of tax @ 2% treating the same as “raw material” in
the manufacture of the end product and are liable to pay tax @ 3% on
the sale thereof. The High Court has seriously erred in holding contrary
and by interfering with the concurrent findings recorded by all the three
authorities below. The impugned judgment and order passed by the High
Court is unsustainable.
11. At this stage it is to be noted that prior to the bifurcation of the
State of Bihar, tax was being paid at 3%. No dispute was raised at that
time.
12. In view of the above and for the reasons stated above, t he
present appeals succeed. The impugned judgment and order passed by
the High Court is hereby quashed and set aside and the asses sment
order passed by the assessing officer, confirmed up to t he revisional
authority – Joint Commissioner is hereby restored. The present appeals
are accordingly allowed. However, there shall be no order as to costs.
Nidhi Jain Appeals allowed
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA
LIMITED AND ANOTHER [M. R. SHAH, J.]