The Supreme Court Tuesday held that inks and processing material used in printing of lottery tickets is taxable under Section 3F(1)(b) of the Uttar Pradesh Trade Tax Act, 1948.
To sustain a levy of trade tax under the Act, the apex court said, three conditions must be met - there must be a works contract, the goods should have been used in the execution of the works contract, and the property in those goods must be transferred to a third party either as goods or in some other form.
Dismissing an appeal by Aristo Printers against the order of the commissioner of trade tax, Lucknow, seeking to levy the tax on the value of ink and processing material used by the company to print lottery tickets, a Bench led by Justice JB Pardiwala said that the works contract in this case is for the printing of lottery tickets, and “the works” refers to the final, tangible printed ticket.
“The 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,” the judgement stated.
It further said all three conditions required to sustain a levy of tax under Section 3F(1)(b) of the 1948 Act were fulfilled.
Aristo Printers, engaged in the business of printing lottery tickets, would undertake the work of printing on paper supplied to it by the parties. The inks and processing material, including the necessary chemicals used in the process of printing, were procured by the company. In 1999, the tax officer levied trade tax on the value of ink, processing material, and packing material used by Aristo to execute the printing work for the assessment years 1996-97 (Apr-Mar) and 1997-98. This was challenged by the company.
To sustain a levy of trade tax under the Act, the apex court said, three conditions must be met - there must be a works contract, the goods should have been used in the execution of the works contract, and the property in those goods must be transferred to a third party either as goods or in some other form.
Dismissing an appeal by Aristo Printers against the order of the commissioner of trade tax, Lucknow, seeking to levy the tax on the value of ink and processing material used by the company to print lottery tickets, a Bench led by Justice JB Pardiwala said that the works contract in this case is for the printing of lottery tickets, and “the works” refers to the final, tangible printed ticket.
“The 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,” the judgement stated.
It further said all three conditions required to sustain a levy of tax under Section 3F(1)(b) of the 1948 Act were fulfilled.
Aristo Printers, engaged in the business of printing lottery tickets, would undertake the work of printing on paper supplied to it by the parties. The inks and processing material, including the necessary chemicals used in the process of printing, were procured by the company. In 1999, the tax officer levied trade tax on the value of ink, processing material, and packing material used by Aristo to execute the printing work for the assessment years 1996-97 (Apr-Mar) and 1997-98. This was challenged by the company.
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