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2025-TIOL-76-SC-MISC IN THE SUPREME COURT OF INDIA CIVIL APPEAL NO. 703 OF 2012 (Arising out of Special Leave Petition (Civil) No. 15476/2011) WITH CIVIL APPEAL NO. 705 OF 2012 (Arising out of Special Leave Petition (Civil) No. 15478/2011) M/s ARISTO PRINTERS PVT LTD Vs COMMISSIONER OF TRADE TAX LUCKNOW, U.P J B Pardiwala & K V Viswanathan, JJ Dated: October 07, 2025 Petitioner Rep by: Bhakti Vardhan Singh UP Trade Tax Act - The appellant, engaged in the business of printing lottery tickets, 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 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 Appellate Authority 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 - On appeal, the Trade Tax Tribunal set aside the levy of tax on the packaging material, and also upheld the order of the Appellate Authority, which had deleted the tax on the value of ink and other processing materials, including chemicals - On revision, the High Court set aside the order of the Tribunal as well as the order passed by the Appellate Authority, so far as they set aside the tax on the value of ink and processing material, i.e., chemical - 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. Held - Entry 54 in List II of the Seventh Schedule to the Constitution of India enables the State Legislature to enact legislation providing for levying and collecting tax in respect of the sale and purchase of goods - Article 286 of the Constitution prohibits the State Legislatures from imposing tax on the sale or purchase of goods where such sale or purchase takes place outside the State, or in the course of the import of the goods into, or export of the goods out of, the territory of India - In light of the Forty-sixth Amendment to the Constitution, several state governments amended their sales tax laws and made provisions for the imposition of sales tax in relation to works contracts and each State adopted its own method of determining taxable turnover either by framing rules under its sales tax law or by issuing administrative directions - The method adopted by the States for determining the taxable turnover relating to works contracts for purposes of levy of sales tax were such that sales tax had to be paid by the building contractors not merely on the value of materials supplied by them in connection with the works contracts but also on the expenditure they had incurred in securing the services of architects and engineers who had supervised the execution of the works, and also on the amount which they were entitled to receive for supervising the execution of the works - While levying sales tax on the price of the materials supplied for the construction of houses, factories, bridges, etc., the sales tax authorities of the States did not take into account the conditions and restrictions imposed by Article 286 of the Constitution and the provisions of the Central Sales Tax Act, 1956 - Section 3F(1)(b) of the Act, 1948, levies tax on the "transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract" - In the case at hand, the principal question that falls for our consideration is whether there has been a transfer of property in the ink and other processing materials used for the purpose of printing lottery tickets, thereby making them liable to the levy of tax under Section 3F(1)(b) of the Act, 1948 - On a close reading of Section 3F(1)(b) of the Act, 1948, it is amply clear that the tax levied is not on the 'goods' produced in pursuance of a works contract, i.e., the lottery tickets in the case at hand - The tax under Section 3F(1)(b) of the Act, 1948, is rather on the 'goods' which are involved in the execution of the works contract - Many works contracts, particularly those for services and transformations, do not result in a new end product or a tangible transfer of property - Determining whether a transfer of property in goods has occurred is undoubtedly more challenging when the good is consumed or the transfer is intangible, as opposed to when it is tangibly present in a final product - Thus, the courts and tribunals must be extra vigilant when faced with such scenarios and must scrutinize the specific facts and the nature of each works contract with great care to make a correct determination as to whether or not a said item has been incorporated in the 'works' of a contract - In the facts of the present case, the levy of sales tax under Section 3F of the Act, 1948, is on the ink and the processing material used by the appellant in printing the lottery tickets - The appellant has, however, not provided an item-wise breakdown of such processing material - If the appellant had provided an item-wise breakdown, it would have facilitated in determining whether there was a transfer of property with regard to each such item - In the facts of present case, there is a transfer of property in the ink and chemicals used in the printing of the lottery tickets, and the works contract in this instance 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, and in this process, there is a tangible transfer of the diluted ink, a composite good comprising both the ink and the processing chemicals - Thus, the transfer of ink and chemicals in their chemically altered form constitutes a valid transfer of property, and therefore, 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 - Thus, in the facts of the present case, all conditions required to sustain a levy of tax under Section 3F(1)(b) of the Act, 1948, are fulfilled - Consequently, the appellant is liable to pay tax under Section 3F(1)(b) of the Act, 1948 on the ink and processing material. The appellant, being aggrieved by the aforementioned orders of the Assessing Authority, preferred appeals before the Deputy Commissioner (Appeals)-II, Trade Tax, Ghaziabad (hereinafter, the "Appellate Authority").