Uttar Pradesh Trade Tax Act, 1948 – ss.2(m), 3F – Works contract – Tax on the right to use any goods or goods involved in the execution of works contract – Appellant undertaking the printing work of lottery tickets – Levy of trade tax u/s.3F on the ink, chemical and processing material used by the appellant – Tribunal deleted the tax on the value of ink and other processing materials, including chemicals – However, the High Court set aside the order passed by the tribunal – Correctness:
Held: Appellant liable to pay tax u/s.3F(1)(b) on the ink and processing material – All three conditions required to sustain a levy of tax u/s.3F(1)(b) are fulfilled: works contract exists for printing of lottery tickets; ink and chemicals have been involved in the execution of the works contract; and the property in the ink and chemicals has been transferred in execution of the works contract – Appellant has admitted that the contract for printing lottery tickets is a works contract – It is clear that the ink, chemical and other processing material were involved in the printing of the lottery tickets – There is a transfer of property in the ink and chemicals used in the printing of the lottery tickets – Works contract is for the printing of lottery tickets, and “the works” refers to the final, tangible printed ticket – Taxable event, or the “deemed sale”, occurs at the precise moment the ink is applied to the paper – This act constitutes “incorporation in the works”, as the ink and the chemicals (with which the ink is mixed) are involved in the execution of the work contract and become a part of the lottery ticket – In this process, there is a tangible transfer of the diluted ink, a composite good comprising both the ink and the processing chemicals – Transfer of ink and chemicals in their chemically altered form constitutes a valid transfer of property – Thus, since it is impossible to transfer the ink without also transferring the chemicals it is diluted with, it can be conclusively inferred that the property in both the ink and the chemicals has been transferred. [Paras 66-73]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.