Recently the Supreme Court's division bench, comprising of Justice M.R. Shah and Justice M.M. Sundresh, ruled that because the main function of oxygen in steel manufacturing is to reduce the carbon content, it can be considered a refining agent rather than a raw material, and thus the concessional rate of sales tax is not available on oxygen. The bench overturned the Jharkhand High Court's decision and restored the orders issued by assessing officers to revisional authority—the Joint Commissioner.

When the findings of the committee of six expert members are recorded in the detailed inspection report, and it is discovered that the oxygen gas is used as a "refining agent" and its main function is to reduce the carbon content as required, the Supreme Court ruled that the oxygen gas cannot be considered a "raw material" utilized in the manufacture of the end product—steel.

"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 in interfering with the concurrent findings recorded by all three authorities below," the court said.

The question was whether the oxygen supplied by the respondent company was a raw material for steel manufacturing and whether the concessional sales tax rate would apply.

The respondent produces pure oxygen and has supplied it to Tata Steel Limited for use in steel production. Tata Steel believed that oxygen should be treated as a raw material in the steelmaking process.

On April 12, 1982, the State Government of Bihar issued a notification under Section 13(1)(b) of the Bihar Finance Act, 1981, imposing a 1% tax on "raw material inputs" and a 3% tax on all other inputs.

Case Title: State of Jharkhand and others Vs Linde India Limited and Another
Citation: Civil Appeal No. 8061-8064 Of 2022