Works contract tax applies when goods are incorporated into the work and property passes, even if the materials are later consumed.

Tax under Section 3F(1)(b) of the Uttar Pradesh Trade Tax Act is attracted on the transfer of property in goods involved in executing a works contract, not on the finished product as such. The taxable event occurs when the goods are incorporated into the works and pass to the customer, whether in their original or altered form. Applying that principle, printing ink and processing chemicals used in printing lottery tickets were part of the execution of the contract and formed a transferable composite medium. Their later consumption or chemical alteration did not negate the transfer of property. The levy on those materials was therefore valid.

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Issues: Whether tax under Section 3F(1)(b) of the Uttar Pradesh Trade Tax Act, 1948 can be levied on ink and processing materials used in printing lottery tickets in the course of execution of a works contract.

Analysis: The levy under Section 3F(1)(b) is on the transfer of property in goods involved in the execution of a works contract, not on the final product by itself. A works contract exists, the goods must be involved in its execution, and the property in those goods must pass to the customer as goods or in some other form. Applying the post-Forty-sixth Amendment framework, the taxable event occurs when the goods are incorporated into the works. On the facts, the printing ink and the processing chemicals were used in and became part of the printed lottery tickets. The subsequent consumption of the materials did not negate the transfer of property, and the diluted ink with chemicals constituted a transferable composite medium.

Conclusion: Tax was correctly exigible on the ink and processing materials used in printing the lottery tickets, and the challenge to the levy failed.

Ratio Decidendi: In a works contract, tax is attracted when property in goods used in execution is transferred in the works, even if the goods are chemically altered or subsequently consumed, provided they are incorporated in the works and form part of the transfer to the customer.

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