In a significant ruling, the Supreme Court of India has clarified that the ink, chemicals, and processing materials used by printing contractors-such as those engaged in printing lottery tickets-are liable to trade tax under Section 3F of the Uttar Pradesh Trade Tax Act, 1948. The verdict came in the appeals filed by M/s Aristo Printers Pvt. Ltd., challenging a 2010 judgment of the Allahabad High Court that had restored the tax levied by the State’s Trade Tax Department.
The bench, led by Justice J.B. Pardiwala, undertook a detailed examination of the concept of “transfer of property in goods” under a works contract, a long-debated issue in Indian tax jurisprudence.
Background
Aristo Printers, a Ghaziabad-based company, was engaged in printing lottery tickets using materials such as ink and chemicals. The paper was provided by clients, while the company supplied the consumables required for printing. The dispute began when the assessing authority levied trade tax on the value of these materials, reasoning that they formed part of the goods transferred in execution of a works contract.
Initially, the appellate authorities and the Trade Tax Tribunal sided with Aristo Printers, holding that such materials were consumables that got “used up” and were not transferred to the customer. However, the Allahabad High Court reversed these findings, reasoning that the ink and chemicals, though mixed and diluted, became part of the printed tickets visible to the naked eye, thereby constituting a transfer of property.
Court’s Observations
The Supreme Court began by dissecting the framework of the Trade Tax Act and the meaning of a works contract post the 46th Constitutional Amendment. The bench observed that the tax under Section 3F(1)(b) applies not on the final goods produced but on the goods involved in executing the contract-whether in their original form or after transformation.
Addressing the appellant’s main argument-that lottery tickets are “actionable claims” and not “goods”-the Court noted that the tax was not on the tickets themselves, but on the ink and chemicals used in their production. “The levy is on the goods involved in the execution of the contract, not on the end product,” the bench clarified.
The Court relied on earlier decisions, including Builders Association of India v. Union of India and Larsen & Toubro v. State of Karnataka, to emphasize that the transfer of property could occur even when goods changed form during the execution process.
“The bench observed, ‘If the ink or chemicals become part of the printed material, even in a transformed or diluted form, their property stands transferred to the client. Such transfer is sufficient to attract tax under Section 3F.’”
Rejecting the notion that consumables automatically escape taxation, the Court held that whether an item is “consumed” or “transferred” depends on the degree to which it becomes part of the final product. In this case, the Court found that the ink and chemicals, being visible and integral to the printed tickets, were indeed transferred.
Decision
In conclusion, the Supreme Court upheld the Allahabad High Court’s order and ruled that ink, chemicals, and other materials used by Aristo Printers in printing lottery tickets are liable to trade tax under Section 3F(1)(b) of the Uttar Pradesh Trade Tax Act, 1948.
By doing so, the Court settled a long-standing ambiguity for printing and processing industries across India, clarifying that the tangible or visible transfer of materials during job work qualifies as “transfer of property in goods” for taxation purposes.
The appeals by Aristo Printers Pvt. Ltd. were accordingly dismissed.
Case Title: M/s Aristo Printers Pvt. Ltd. vs Commissioner of Trade Tax, Lucknow (U.P.)
Citation: 2025 INSC 1188
Case Type: Civil Appeal Nos. 703 & 705 of 2012 (Arising out of SLP (C) Nos. 15476 & 15478 of 2011)
Decision Date: 2025