Consumables used in textile processing are not taxable sales when they are consumed and no property passes to the customer.

Under the U.P. Trade Tax Act, dyes and chemicals used in bleaching, colouring and dyeing of grey cloth in job work were treated as consumables consumed in processing, not as goods transferred to the customer. Because the materials lost their identity during processing and no property in them passed to the customer, they did not amount to taxable sales. The earlier Division Bench ruling, and the State Government's decision dated 7.10.2005 relied on there, was applied against assessment, so the tax demand on the processing materials was not sustainable.

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Issues: Whether dyes and chemicals used in the dyeing, colouring and processing of grey cloth in job work were liable to tax under the U.P. Trade Tax Act.

Analysis: The question was answered by applying the earlier Division Bench ruling which held that the State Government's decision dated 7.10.2005 on the representation of textile processors was binding on the assessing authorities. On that basis, dyes and chemicals used in bleaching, colouring and dyeing of grey cloth were treated as consumables consumed in the processing and not transferred to the customer as goods. Since the materials lost their existence in the processing and no transfer of property in those materials occurred, they did not fall within taxable sales.

Conclusion: The dyes and chemicals used in the processing job work were not exigible to tax, and the revision failed.

Final Conclusion: The tax demand on the processing materials was set aside in effect, and the dealer's exemption from tax liability was upheld.

Ratio Decidendi: Materials consumed and lost in the course of processing, without transfer of property to the customer, are not taxable as sales merely because they are used in job work.

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