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State of Jharkhand and Ors. Etc. vs. Linde India Ltd and Anr. Etc.

Civil Appeal · 2022 INSC 1240Decided 2 Dec 2022
Civil Appeal Nos. 8061-8064 of 2022
M.R. Shah · M.M. Sundresh

Background

Linde India Limited supplied pure oxygen gas to Tata Steel for its steel-making process and claimed a concessional 2% sales tax rate under the Bihar Finance Act, 1981 (as applicable to Jharkhand), on the basis that oxygen was a "raw material." A six-member expert committee, appointed after an earlier Supreme Court remand, found that oxygen was only a "refining agent" used to reduce carbon content, not a direct raw material, and tax authorities at three levels assessed tax at the higher 3% rate. The Jharkhand High Court overturned these findings and held oxygen qualified as raw material, prompting the State to appeal.

Decision Breakdown

The Supreme Court held that the High Court, exercising writ jurisdiction under Article 226, should not have overturned the concurrent factual findings of three expert/technical authorities on a technical question the High Court lacked expertise to re-decide. On merits, applying the tests from earlier precedents (Ballarpur Industries and Thomas Stephen & Co.), the Court found that oxygen used only to reduce carbon content in steel-making is akin to a "refining agent" or processing aid, not an indispensable raw material of the end product, so the concessional 2% rate did not apply. The assessment orders taxing the sale at 3% were restored and the High Court's judgment was set aside.

Lesson Learnt

Courts exercising writ/judicial review powers should be cautious about overturning technical, fact-based findings reached by expert committees and confirmed by multiple statutory authorities; and for tax purposes, an ingredient used only to refine or improve a manufacturing process, without becoming indispensable to or embodied in the end product, is not automatically a "raw material" entitled to concessional treatment.

Official source (sci.gov.in)View Judgment (PDF)

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