2010 (12) TMI 1095 - HC - VAT and Sales Tax

Whether on the facts and in the circumstances of the case the Trade Tax Tribunal was legally justified to set aside the tax imposed on the sale of goods transferred in execution of works contract ? Whether on the facts and in the circumstances of the case the Trade Tax Tribunal has rightly treated the printing work as job-work in the light of the decision of the honourable Supreme Court in the case of Associated Cement Companies Ltd. v. Commissioner of Customs 2001 (1) TMI 248 - Supreme court of India ? Held that - The order of the Tribunal is not sustainable. Section 3F of the Act levies tax on the value of goods involved in execution of works contract. It was not the case of the assessee at any stage that the chemical (processing material) was consumable and evaporates in the process of printing and is not passed on to the customers. Therefore both the ink and chemical used in the printing are passed on to the customers. It may be mentioned here that the assessee had also purchased and used consumable but the same has not been taxed. It may be mentioned here that the decision in the case of R.M.D.C. Press Pvt. Ltd. 1998 (9) TMI 635 - BOMBAY HIGH COURT relied upon by the Tribunal is no longer a good law in view of the decision of the apex court in the case of Associated Cement Companies Ltd. v. Commissioner of Customs 2001 (1) TMI 248 - Supreme court of India . Appeal allowed.

Summary

Issues:
1. Whether the Trade Tax Tribunal was justified in setting aside the tax imposed on the sale of goods transferred in execution of works contract?
2. Whether the Trade Tax Tribunal correctly treated the printing work as job-work in light of the decision of the Supreme Court?

Analysis:
1. The respondent-assessee was involved in printing lottery tickets using ink and processing materials. The assessing authority taxed the value of ink and processing materials under section 3F of the Act, but the appellate authority deleted the tax on ink and processing materials while upholding the tax on packing materials. The Tribunal, relying on previous court decisions, upheld the deletion of tax on ink and processing materials. The Revenue challenged this decision, arguing that ink and chemicals passed on to customers during printing. However, the court found that both ink and chemicals were indeed passed on to customers, as evident on the printed paper. The court cited precedents where similar situations were deemed taxable, leading to the conclusion that the tax on ink and processing materials should not have been deleted.

2. The court referred to Bombay High Court judgments where it was established that in works contracts like dyeing and printing, the transfer of property in colors, dyes, and chemicals occurs, making them taxable. The court also highlighted a case regarding photocopying where ink was considered to pass on to customers, reinforcing the tax liability. The court noted that the previous decision relied upon by the Tribunal was no longer valid based on Supreme Court rulings. Consequently, the court set aside the Tribunal's decision and restored the tax on ink and processing materials, overturning the orders of the Tribunal and the first appellate authority.

In conclusion, the High Court found the Tribunal's decision unsustainable and allowed the Revenue's revisions, thereby reinstating the tax on ink and processing materials used in the printing process.