Works contract taxation of printing materials upheld for ink and chemicals used in lottery ticket printing.

Printing lottery tickets was treated as execution of a works contract, and the value of ink and chemical processing materials used in that process was held to be taxable as goods involved in the contract. The Allahabad HC noted that the ink remained visible on the printed paper and that the chemicals were used with diluted ink during execution, so both were passed on to customers as part of the works contract. The Tribunal's view that no tax was payable on these items was found unsustainable, and the later Supreme Court rulings on works contracts and transfer of property in goods were applied to reject the contrary authorities.

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Issues: Whether the value of ink and processing materials, including chemicals, used in printing lottery tickets was liable to tax as goods involved in execution of a works contract.

Analysis: Printing work was treated as a works contract. In the printing process, the ink was visible on the printed paper and the chemical processing materials were used with the diluted ink in the course of execution. The Court held that both the ink and the chemicals were passed on to the customers and were therefore goods involved in the works contract. The view taken by the Tribunal that no tax was payable on these items was found unsustainable, and the authorities relied upon by the Tribunal were held not to govern the matter in view of the later Supreme Court rulings on works contracts and transfer of property in goods.

Conclusion: The value of ink and processing materials used in printing was taxable under section 3F of the U.P. Trade Tax Act, 1948, and the deletion of tax by the appellate authorities was set aside.

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