STATE OF JHARKHAND AND OTHERSversusLINDE INDIA LIMITED AND ANOTHER

858                      [2022]REPORTS
               SUPREME COURT   17 S.C.R. 858               [2022] 17 S.C.R.


A                  STATE OF JHARKHAND AND OTHERS
                                        v.
                  LINDE INDIA LIMITED AND ANOTHER
                      (Civil Appeal Nos. 8061-8064 of 2022)
B                            DECEMBER 02, 2022
                [M. R. SHAH AND M. M. SUNDRESH, JJ.]
             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
C
      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
D     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
E
      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
F     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
G
      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.
H
                                       858
   STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                         859
               LIMITED AND ANOTHER

      Allowing the appeals, the Court                                   A
       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        B
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         C
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”       D
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               E
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               F
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            G
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

                                                                        H
860           SUPREME COURT REPORTS                    [2022] 17 S.C.R.


A     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
B
      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
C     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]
D           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’
E     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
F     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
G     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]

H
   STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                            861
               LIMITED AND ANOTHER

      Deputy Commissioner of Sales Tax (Law), Board of                     A
      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                  B
      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.
                        Case Law Reference                                 C
[2009] 4 SCR 253                 referred to              Para 2.3
[1989] 1 Suppl. SCR 323          referred to              Para 4.4
[1988] 3 SCR 248                 relied on                Para 10
      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 8061-                D
8064 of 2022.
      From the Judgment and Order dated 03.08.2015 of the High Court
of Jharkhand at Ranchi in Writ Petition (T) Nos. 1929, 1939, 1940 and
1941 of 2015.
       Arunabh Chowdhury, Sr. Adv., Shantanu Sagar, Abhishek Roy,          E
Karma Dorjee, Dechen W. Lachungpa, Aniruddma M. Sethi, Sidharth
Sarthi, Prabhat R. Raj, Advs. for the Appellants.
     S. Ganesh, Sr. Adv., Ajay Aggarwal, Rajan Narain, Advs. for the
Respondents.
                                                                           F
      The Judgment of the Court was delivered by
      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    G
writ petitions, preferred by the respondents, by which the High Court
has allowed the said writ petitions and has quashed and set aside 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, holding
                                                                           H
862            SUPREME COURT REPORTS                          [2022] 17 S.C.R.


A     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:
B            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
C     “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%.
D
              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 manufacturing or
E     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 commerce”.
             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
F     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
G     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%.
            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
H
   STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                               863
        LIMITED AND ANOTHER [M. R. SHAH, J.]

respondent No.1 has no locus to file the writ petition as the tax was         A
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 allowed by
this Court vide reported judgment and order in the case of BOC India
                                                                              B
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 came to be
remanded to the assessing authority. That thereafter, a six member
committee was constituted to enquire into whether the pure oxygen sold        C
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
                                                                              D
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          E
‘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
                                                                              F
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               G
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 dismissed 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       H
864             SUPREME COURT REPORTS                         [2022] 17 S.C.R.


A     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 dioxide by
B
      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.
C            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 Court has
      seriously erred in interfering with the concurrent findings recorded by all
      the three authorities below, while exercising the powers under Article
D     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 therefore the
      oxygen does not fall in the category of other goods used in the
E     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 Constitution of
      India. Reliance is placed on the decision of this Court in the case of
      State Bank of India v. K.S. Vishwanath, 2022 SCC OnLine SC 667.
F
             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
G     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
H     SCC 264, goods used for ancillary purposes like fuel in the process of
   STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                                865
        LIMITED AND ANOTHER [M. R. SHAH, J.]

the manufacture cannot be said to be “raw material” for manufacture of         A
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        B
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.
                                                                               C
       3.5 It is submitted that in fact the 3% tax was paid 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 when the
State of Jharkhand came into existence and they demanded the rate of           D
tax at 3%.
       3.6 Making the above submissions and relying upon the aforesaid
decisions, it is prayed to allow the present appeals and quash and set
aside the impugned common order passed by the High Court.
                                                                               E
      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        F
appeals is, as to whether the oxygen gas supplied by respondent 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 material”, the        G
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 manufacture of steel
making and therefore the same is “raw material” and consequently               H
866             SUPREME COURT REPORTS                          [2022] 17 S.C.R.


A     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 steel by Tata
B     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 also
      noted the use of the oxygen in both the stages in both the operations. It
C     is submitted that thereafter the High Court has 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
D     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)
E
      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
F     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.”
G
             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 impugned
H     judgment and order.
    STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                                 867
         LIMITED AND ANOTHER [M. R. SHAH, J.]

       4.6 It is submitted that the manufacturing process for making steel       A
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,
                                                                                 B
the steel cannot be manufactured.
       4.7 Now so far as the submission on behalf of the State that the
assessee is not entitled to the benefit of exemption notification 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 therefore such a           C
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 have already                  D
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 submitted that in the
                                                                                 E
present case, Linde India Limited has manufactured/produced 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 described 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            F
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           G
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.                                                                        H
868                SUPREME COURT REPORTS                           [2022] 17 S.C.R.


A            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
B                    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
C                    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 the
D                    delivery end of the process;
            iv)      the quantity of the raw material used is also significant
                     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
E                    the present case, as rightly noted by the High Court in its
                     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
F                    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;
G           vii)     the function of the raw material itself. In the present 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
H
   STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                                 869
        LIMITED AND ANOTHER [M. R. SHAH, J.]

      viii)    the application of the raw material. In the present case,        A
              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 entitled to the                  B
concessional rate of tax at 2% on purchase of oxygen by Tata Steel
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 this
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     C
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        D
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           E
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,          F
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, upon which
                                                                                G
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?
                                                                                H
870             SUPREME COURT REPORTS                          [2022] 17 S.C.R.


A            6. At the outset, it is required to be noted that pursuant to the
      earlier order passed by this Court, the matter was remanded to consider
      the question, as to whether oxygen gas is a “raw material” for the
      manufacture of the steel. That thereafter on remand, 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
B
      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
C     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
D     as per the requirement and therefore the oxygen gas cannot be said to
      be a direct “raw material” of steel. While holding so, the 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)
E
            by mixing it with lime stone and coke in its blast furnace. Iron
            oxide is reduced at various temperature ranges. Main objective
            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
F           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,
G           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
H
STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                             871
     LIMITED AND ANOTHER [M. R. SHAH, J.]

 pure oxygen used in Refining process is called raw-material by          A
 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           B
 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: -
                                                                         C
    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
                                                                         D
    Iron + Chromium = Chrom - used for cutting tools and crushing
    machine.
 Iron is not used in pure form because it is soft and readily
 stretchable upon heating, however, if 0.1 +1.5% carbon is mixed
 in it, it becomes hard and strong and ready to use.
                                                                         E
 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.
                                                                         F
 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) —————— 2H2(g) + O2(g)
                                                                         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 H2SO4 (Sulfuric Acid). Thus,
 H2SO4 (Sulfuric Acid) cannot be held raw-material of Hydrogen
 or Oxygen only on this ground.
                                                                         H
872            SUPREME COURT REPORTS                          [2022] 17 S.C.R.


A           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 of
            which is to reduce carbon contents as per the requirements, which
B           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
C     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
D
      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.
             7. As per the settled position of law, the High Court in exercise of
E
      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
F     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
G     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
H     by the committee, accepted by the assessing officer and confirmed up
   STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                               873
        LIMITED AND ANOTHER [M. R. SHAH, J.]

to the Joint Commissioner – Revisional Authority, it is required to be        A
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     B
the case of Ballarpur Industries Limited (supra), more particularly
the observations made in paragraphs 13 & 14. In the case before 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 manufacturing            C
process, this Court opined in paragraph 14 that the sodium sulphate used
in the manufacture of paper can be said to be a “raw material”. 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,          D
      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 qualitative
      changes and in such altered form find themselves in the end             E
      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     F
      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 chemical
      processes culminating in the emergence of the desired end product,
      that having regard to its importance in and indispensability for the    G
      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 end of
      the process. The ingredient goes into the making of the end product
                                                                              H
874             SUPREME COURT REPORTS                          [2022] 17 S.C.R.


A           in the sense that without 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.”
B            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:
C           “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
D           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
E           qualify itself as a “raw material” it must necessarily 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
F     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.

G            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 found 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
H     manufacture as raw material or of other components which go into the
    STATE OF JHARKHAND AND OTHERS v. LINDE INDIA                                  875
         LIMITED AND ANOTHER [M. R. SHAH, J.]

making of the end product. It was found that cashew shells do not tend            A
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         B
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.           C
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         D
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.                                                                             E
      12. In view of the above and for the reasons stated above, the
present appeals succeed. The impugned judgment and order passed by
the High Court is hereby quashed and set aside and the assessment
order passed by the assessing officer, confirmed up to the revisional
authority – Joint Commissioner is hereby restored. The present appeals            F
are accordingly allowed. However, there shall be no order as to costs.

Nidhi Jain                                                      Appeals allowed


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