Taxable Purchase of Printing Ink for Polythene Rolls Upheld Under Sales Tax Act

The court held that the purchase of ink for printing polythene rolls is taxable under Section 3-B of the Tamil Nadu General Sales Tax Act, 1959. The court referred to conflicting judgments, analyzed the impact of the 46th Amendment to the Constitution of India, and upheld the constitutionality of the amendment allowing states to tax goods in works contracts. The court emphasized the divisibility of works contracts into goods and services components, affirming the taxability of the goods component. The Writ Appeal was dismissed, and the judgment of the learned Single Judge was upheld.

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Issues Involved:
1. Whether the purchase of ink for printing polythene rolls is taxable under Section 3-B of the Tamil Nadu General Sales Tax Act, 1959.
2. Examination of judicial approaches prior to and post the 46th Amendment of the Constitution of India.
3. Interpretation of the Tamil Nadu State Amendment and its effect on the taxation of works contracts.
4. Analysis of various relevant judgments from the Supreme Court, Bombay High Court, and Kerala High Court.
5. Necessity for reference to a larger bench due to conflicting views in previous judgments.

Detailed Analysis:

I) Introduction:
The appellant, a registered dealer under the Tamil Nadu Sales Tax Act, 1959, filed a writ petition challenging the final assessment order by the Commercial Tax Officer, which taxed the transfer of ink used in printing as a works contract under Section 3-B of the Tamil Nadu General Sales Tax Act, 1959. The learned Single Judge dismissed the writ petition, confirming the tax levy but granting relief from the penalty.

II) Order of Reference:
The Writ Appeal was referred to a larger bench due to conflicting judgments by different benches of the court. The primary question was whether the purchase of ink for printing polythene rolls is taxable under Section 3-B of the Tamil Nadu General Sales Tax Act, 1959.

III) Judicial Approach Prior to the 46th Amendment:
Before the 46th Amendment, the Supreme Court in State of Madras vs. Gannon Dunkerly & Co. (Madras) Ltd. held that a building contract could not be taxed as a sale of goods unless there was an agreement to transfer property in goods. This principle was reiterated in The Assistant Sales Tax Officer vs. B.C.Kame, where the court held that a photographer's contract was for skill and labor, not a sale of goods.

IV) The 46th Amendment to the Constitution of India:
The 46th Amendment inserted Clause 29A in Article 366, which included tax on the transfer of property in goods involved in the execution of a works contract.

V) Vires Upheld:
The constitutionality of the 46th Amendment was upheld in Builders Association of India vs. Union of India, where the Supreme Court held that the amendment allowed states to tax the value of goods involved in works contracts.

VI) March of Law Post 46th Amendment:
A) Supreme Court of India:
In Gannon Dunkerley II, the Supreme Court held that the 46th Amendment allowed states to tax the value of goods involved in works contracts, excluding charges for labor and services. This principle was reiterated in subsequent cases, including Associated Cement Companies Ltd. vs. Commissioner of Customs and State of Karnataka vs. Pro Lab & Ors.

B) Bombay High Court:
B1) Full Bench:
The Full Bench in Sarvodaya Printing Press vs. State of Maharashtra upheld that consumables in works contracts are taxable. This was affirmed by the Supreme Court.

B2) A Slip Again:
In Commissioner of Sales Tax vs. Tvl.R.M.D.C.Press Private Limited, the court erroneously held that ink used in printing was not taxable, which was later declared per incuriam in Matushree Textiles Ltd.

C) Kerala High Court:
C1) Full Bench:
In Enviro Chemicals vs. State of Kerala, the Full Bench held that chemicals used in effluent treatment, though consumed, are taxable as they are transferred in the execution of works contracts.

VII) Tamil Nadu State Amendment:
Section 3B of the Tamil Nadu General Sales Tax Act, 1959, was examined, which levies tax on the transfer of property in goods involved in works contracts.

VIII) Interpretation by the Madras High Court:
The court examined various judgments, concluding that printing ink used in works contracts is taxable. The judgment in M.S.Mohan Offset Printers vs. State of Tamil Nadu held that printing ink is tangible and its use in works contracts results in a transfer of property, making it taxable under Section 3-B.

IX) Necessity for Reference:
The reference was necessary due to conflicting views in previous judgments. The court noted that earlier decisions did not consider the authoritative pronouncements of the Supreme Court and other high courts.

X) The Reference Answered:
The court answered the reference, stating that the purchase of ink for printing is taxable under Section 3-B of the Tamil Nadu General Sales Tax Act, 1959.

XI) Conclusion:
The court held that the correct position of law, as repeatedly pointed out by the Supreme Court, is that works contracts are divisible into contracts for sale of goods and services, making the goods component taxable. The Writ Appeal was dismissed, and the judgment of the learned Single Judge was upheld.

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