Tax on dyes and chemicals in job work applies only to materials actually transferred into the finished fabric.

In job-work dyeing, tax is chargeable only on the value of dyes, colours, and chemicals actually transferred to, and embedded in, the finished fabric; the extent of wastage or wash-out is a factual question. The Tribunal's approach of taxing the entire quantity, or a proportionate part without proper factual enquiry, was not sustained. The matter was remanded for the Assessing Officer to determine on evidence the quantity actually transferred and taxable in the turnover.

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Issues: Whether tax could be levied on the entire value of dyes and chemicals used in the job work process, or only on the quantity actually transferred to the fabric and retained in the turnover.

Analysis: The appeal concerned levy of tax on dyes and chemicals used in dyeing job work under the sales tax and value added tax framework. The Tribunal had upheld the assessment on the footing that a part of the chemicals was taxable on a proportionate basis and the entire quantity of dyes had been brought to tax. The governing principle applied was that only the value of consumables or materials that are actually transferred to the principal and embedded in the textile can be subjected to tax, while the extent of wastage or wash-out is a factual matter requiring enquiry by the Assessing Officer. The earlier coordinate Bench decision had already held that the issue of quantity transferred must be determined on evidence and remitted for factual determination.

Conclusion: The levy could not be sustained on the basis adopted by the Tribunal, and the matter had to be remanded for factual determination of the quantity of dyes, colours, and chemicals actually transferred and taxable.

Final Conclusion: The assessee succeeded and the assessment dispute was sent back for fresh factual examination before the Assessing Officer.

Ratio Decidendi: In a job-work process, tax is chargeable only on the value of goods actually transferred or embedded in the finished product, and the extent of such transfer must be determined on evidence by the assessing authority.

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