Bihar Finance Act, 1981: s.13(1)(b) – Benefit of concessional rate of tax under – Entitlement to – Oxygen gas sold by respondent No.1-manufacturer to the respondent No.2, if can be said to be used as “raw material” in the manufacturing process of steel and would be taxed at the rate of 2% of the sales tax, which otherwise is chargeable @ 3% on the sale thereof – Tribunal and the authorities below held 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 –However, the High Court held that the oxygen can be said to be a “raw material” and thus, respondent No. 1 entitled to concessional rate of tax at 2% - On appeal, held: High Court ought to have appreciated the findings by the committee consisting of expert members recorded in the inspection report which was confirmed by the authorities below 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 – 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 – High Court in exercise of powers u/Art. 226 is not sitting as an appellate court against the findings recorded on appreciation of facts and the evidence on record – High Court has seriously erred in holding contrary and by interfering with the concurrent findings recorded by all the three authorities below – Thus, respondents not entitled 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 – Impugned judgment and order passed by the High Court is unsustainable and set aside – Constitution of India – Art. 226.
Allowing the appeals, the Court
HELD: 1.1 It is required to be noted that an inspection and enquiry was carried out by a six members expert committee 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 the same is not a direct “raw material” of steel. By submitting 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 manufacturing. That thereafter it was concluded that the oxygen gas used is only a ‘refining agent’ and the main function of it is to reduce the carbon content as per the requirement and thus, the oxygen gas cannot be said to be a direct “raw material” of steel. On the basis of the said inspection report by the committee consisting of six expert members, the assessing officer passed an assessment order holding that the respondents are not 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 Commissioner and thereafter by the Joint Commissioner-Revisional Authority. The findings of fact recorded by the three authorities below have been upset by the High Court in exercise of powers under Article 226 of the Constitution of India. [Para 6][870-A-D; 872-C-E]
1.2 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 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. [Para 7][872-E-G]
1.3 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 manufacture of processing of goods, the same can be said to be a “raw material” for the manufacture of the end product-steel. [Para 8][872-H; 873-A]
1.4 Applying the law laid down by this Court in the case of Thomas Stephen & Co. Ltd.’s case 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 entitled 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. Furthermore, prior to the bifurcation of the State of Bihar, tax was being paid at 3%. No dispute was raised at that time. The impugned judgment and order passed by the High Court is quashed and set aside and the assessment order passed by the assessing officer, confirmed up to the revisional authority-Joint Commissioner is restored. [Paras 10-12][875-B-F] Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M/s Thomas Stephen & Co. Ltd. (1988) 2 SCC 264 : [1988] 3 SCR 248 – relied on.
BOC India Limited v. State of Jharkhand and Others (2009) 15 SCC 590 : [2009] 4 SCR 253; State Bank of India v. K.S. Vishwanath 2022 SCC OnLine SC 667; Collector of Central Excise, New Delhi v. Ballarpur Industries Limited (1989) 4 SCC 566 : [1989] 1 Suppl. SCR 323 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.