The Supreme Court has levied tax on ink and other processing materials, including chemicals, etc. used in the printing of lottery tickets on works contract basis under section 3F of the UP Trade Tax Act, 1948.
The bench of Justice J.B. Pardiwala and Justice K.V.Viswanathan dismissed the Assessee’s civil appeal against the Allahabad HC judgment. The bench clarified that for sustaining levy under section 3F, three conditions must be met, viz (i) existence of a works contract, (ii) involvement of goods in works contract execution, and (iii) transfer of property in those goods to a third party during works contract execution.
The appellant-assessee is engaged in the business of printing lottery tickets. It would undertake the work of printing on the paper that was supplied to it by the parties. The ink and processing material, including the necessary chemicals used in the process of printing, were procured by the appellant itself.
The Trade Tax Officer (Assessing Authority) levied trade tax on the value of ink, processing material and packing material used by the appellant for executing the printing work on the basis of Section 3F of the Uttar Pradesh Trade Tax Act, 1948.
The appellant, being aggrieved by the orders of the Assessing Authority, preferred appeals before the Deputy Commissioner (Appeals)-II, Trade Tax, Ghaziabad. It was argued by the appellant before
the Appellate Authority that the ink, chemicals and other processing materials had not been passed on with the lottery tickets and thus the value of such goods could not have been made liable to tax under Section 3F of the Act, 1948. The Appellate Authority accepted the claim of the appellant and accordingly deleted the tax assessed on the value of ink and other processing materials. However, the Appellate Authority upheld the levy of tax on the packing materials.
The two sets of appeals were filed before the Trade Tax Tribunal against the order passed by the Appellate Authority. One set of appeals by the Commissioner of Trade Tax, Uttar Pradesh, against the deletion of tax on the ink and processing material. Another set of appeals by the assessee assailing the levy of tax on the packing material.
The Tribunal allowed the appellant’s appeals and set aside the levy of tax on the packaging material. Furthermore, the Tribunal dismissed the Revenue’s appeals and affirmed the order of the Appellate Authority, which had deleted the tax on the value of ink and other processing materials, including chemicals.
The department challenged the order before the Allahabad High Court. The High Court allowed the revision applications on the ground that the diluted ink (consisting of the ink and the chemicals) was passed onto the customers and thus the ink and the processing material, i.e., the chemical, could not be considered as consumables.
The Apex Court observed that the Assessee meets all three conditions for the variousreasons.
Firstly, Assessee admitted the existence of a works contract.
Secondly,records clearly shows that ink, chemicals, and other processing materials were used in printing lottery tickets.
Thirdly, property in ink and chemicals were transferred during printing.
Fourthly, the works contract in this case is the printing of lottery tickets, and the ‘works’ refers to the final tangible printed goods.
Lastly, the taxable event or deemed sale occurs at the precise moment the ink is applied to the paper, and thereby ink and chemicals become part of the lottery tickets, hence, there is a tangible transfer of diluted ink as ‘composite goods’ comprising both ink and processing chemicals.
The Apex court dismissed the appeal against the Allahabad High Court’s judgment.
Case Details
Case Title: M/S. Aristo Printers Pvt. Ltd. Versus Commissioner Of Trade Tax, Lucknow, U.P.
Case No.: Civil Appeal No. 703 Of 2012
Date: October 07, 2025
