This Supreme Court judgment clarifies the levy of tax on goods involved in a works contract under Article 366(29-A)(b) of the Constitution. The Court held that tax is leviable on the transfer of property in goods, even if consumed, provided the transfer occurs upon their incorporation into the works. The taxable event is the deemed sale at the moment of incorporation, not the subsequent consumption or tangible presence in the final product.
Facts Of The Case:
The appellant, M/s. Aristo Printers Pvt. Ltd., was engaged in the business of printing lottery tickets on paper supplied by its clients, while it procured the ink and processing materials, including chemicals, itself. The Assessing Authority levied trade tax on the value of these materials under Section 3F of the Uttar Pradesh Trade Tax Act, 1948. The appellant successfully appealed this levy before the Appellate Authority and the Trade Tax Tribunal, which held that since the ink and chemicals were consumed in the printing process and not transferred to the customer as goods, they were not taxable. However, the High Court, in revision, reversed this decision. It held that the diluted ink, a composite of ink and chemicals, was transferred onto the paper in the execution of the works contract, making it liable to tax. The appellant then appealed to the Supreme Court, contending that no transfer of property in the consumed goods had occurred.
Procedural History:
The procedural history of this case began with the Assessing Authority levying trade tax on the ink and processing materials used by the appellant in printing lottery tickets. The appellant successfully challenged this levy before the Appellate Authority, a decision which was subsequently affirmed by the Trade Tax Tribunal. The Revenue then filed revision applications before the High Court, which allowed the revisions, set aside the orders of the Tribunal and the Appellate Authority, and restored the assessment order, thereby holding the goods taxable. It is from this impugned judgment of the High Court that the appellant filed the present civil appeals before the Supreme Court of India.
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Court Observation:
The Supreme Court observed that the levy of tax under Section 3F of the UP Trade Tax Act is on the transfer of property in goods involved in the execution of a works contract, not on the final product. It clarified that the taxable event is the “deemed sale,” which occurs at the moment the goods are incorporated into the works, irrespective of their subsequent consumption. The Court held that the ink and chemicals were transferred in a chemically altered form when applied to the paper, constituting a tangible transfer of property. It concluded that the emphasis should be on whether a transfer of property has occurred, not on whether the goods are consumables or exist in the final product, thereby upholding the High Court’s decision.
Final Decision & Judgement:
The Supreme Court dismissed the appeals, upholding the High Court’s judgment. The Court concluded that the appellant is liable to pay tax under Section 3F(1)(b) of the Uttar Pradesh Trade Tax Act, 1948, on the value of the ink and processing materials used in printing the lottery tickets. It was definitively held that all three conditions for the levy were met: a works contract existed; the ink and chemicals were involved in its execution; and the property in these goods was transferred to the client when they were incorporated into the printed tickets, constituting a deemed sale, notwithstanding their consumption in the process.
Case Details:
Case Title: M/s. Aristo Printers Pvt. Ltd. vs. Commissioner of Trade Tax, Lucknow, U.P. Civil Appeal No.: Civil Appeal Nos. 703 & 705 of 2012 Date of Judgement: October 07, 2025 Judges/Justice Name: Justice J.B. Pardiwala and Justice K.V. Viswanathan
Download The Judgement Here