Integrated manufacturing process recognized for oxygen used in blast furnaces, securing exemption for steel production.

Oxygen gas used in blast furnaces to produce hot metal, later sent to steel melting shops, was treated as used directly in the manufacture of steel for exemption under Notification No. 145/71. The exemption turned on whether the gas formed part of one integrated manufacturing process culminating in steel; the answer was yes, because conversion of iron ore into hot metal and its immediate use in steel melting shops was one continuous process. The same factual issue had already been decided by the Patna High Court, and the excise duty demand was therefore not sustainable.

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Issues: Whether oxygen gas used in the blast furnaces for producing hot metal, which was subsequently taken to the steel melting shops for manufacture of steel, qualified for exemption under Notification No. 145/71 as oxygen used directly in the manufacture of steel.

Analysis: The exemption notification granted relief when oxygen gas was used directly in the manufacture of steel, and the associated procedural requirement applied where the gas was used elsewhere than in the factory of production. The process of converting iron ore into hot metal in the blast furnaces and its immediate use in the steel melting shops was treated as part of one integrated manufacturing process culminating in steel. On that basis, the oxygen employed at the blast furnace stage was regarded as directly used in the manufacture of steel, and the issue had already been concluded on identical facts by the Patna High Court.

Conclusion: The oxygen gas used in the blast furnaces was eligible for the exemption, and the demand for excise duty was not sustainable.

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