Oxygen not a 'Raw-Material' for Manufacture of Steel, not Eligible for Concessional Sales Tax Rate: Supreme Court [Read Order]

In a ruling against the manufacturers of Tata Steel, the Supreme Court has held that oxygen cannot be treated as a “raw material” for the manufacturing of the product steel, and therefore, not eligible for a concessional tax rate of 2% sales tax under Section 13(1)(b) of the Bihar Finance Act, 1981.

Respondent, Linde India Limited is a manufacturer of pure oxygen sold the oxygen to Tata Steel, raised a dispute with respect to the rate of concessional rate of tax. According to the assessee, the pure oxygen sold to 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 the assessee in favour of Tata Steel at 2% on the ground that such sale is not of “raw material” but of goods other than raw materials and as such the concessional rate of tax applicable to such sale under Section 13(1)(b) would be 3%, rather than 2%.

A tw0-judge bench of the Apex Court comprising Justice M R Shah and Justice M.M. Sundresh referred the decision in the case of Thomas Stephen & Co. Ltd. to the facts of the case and observed that“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.“

Concluding the order, the Apex Court held that “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.”

To Read the full text of the Order CLICK HERE

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