Supreme Court holds ink and processing chemicals in printing liable to works-contract tax

A Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan heard appeals by a printer challenging a High Court order that restored trade tax on ink and processing chemicals used in printing lottery tickets under Section 3F(1)(b) of the Uttar Pradesh Trade Tax Act, 1948. The appeals arose from assessment orders of the Trade Tax Officer, subsequent appellate and tribunal orders, and revision proceedings in the Allahabad High Court.

The Court dismissed the appeals and upheld the levy of tax on the ink and processing materials used in the printing of lottery tickets. It held that three conditions for taxation under Section 3F(1)(b) were satisfied: there was a works contract; goods were involved in its execution; and property in those goods was transferred to the contractee “either as goods or in some other form.” The Court emphasised that the taxable event was the “deemed sale” and occurred when the contractor’s goods became incorporated in the works — in this case, at the moment the ink (diluted with processing chemicals) was applied to the paper. The Court, in its reasoning, observed: The judgment further recorded that “the taxable event, or the ‘deemed sale’, occurs at the precise moment the ink is applied to the paper,” and rejected the contention that consumption or evaporation of processing chemicals automatically precluded transfer.

Background The appellant, M/s Aristo Printers Pvt. Ltd., undertook printing of lottery tickets on paper supplied by principals and procured ink and processing chemicals itself. The Assessing Authority levied trade tax on the value of ink, processing and packing materials for assessment years 1996–97 and 1997–98 under Section 3F. The appellant successfully persuaded the first appellate authority to delete tax on inks and chemicals (though packing material remained taxed). The Tribunal affirmed deletion and relied on earlier precedents. The State challenged those decisions by revisions to the Allahabad High Court, which allowed the revisions, set aside the Tribunal and appellate orders, and restored the assessing authority’s levy on ink and chemicals, reasoning that the diluted ink and chemicals were passed on to customers and were not mere consumables. The appellant contested before the Supreme Court, arguing among other points that lottery tickets were “actionable claims” excluded from the definition of “goods” and that inks and chemicals were consumed and not transferred. The State countered that ink and chemicals were transferred as part of the printing works and cited High Court and tribunal precedents. The Supreme Court reviewed constitutional and statutory law on works contracts, including post‑Forty‑sixth Amendment jurisprudence (Gannon Dunkerley, Builders Association, Larsen & Toubro, Xerox Modicorp and related authorities), and held that the transfer of property could occur even where goods changed form or were subsequently consumed, provided they were “involved in the execution of the works contract” and became incorporated in the works. The Court therefore dismissed the appeals and affirmed liability to pay tax under Section 3F(1)(b) on the ink and processing materials. The judgment also recorded that two other connected appeals were de‑tagged for rehearing on a limited issue in November 2025.

Case Details: Case No.: Civil Appeal Nos. 703 & 705 of 2012 (Arising out of SLP (C) Nos. 15476/2011 & 15478/2011) Case Title: M/s Aristo Printers Pvt. Ltd. v. Commissioner of Trade Tax, Lucknow, U.P. Appearances: For the Petitioner(s): Mr. Niraj Kumar, Advocate For the Respondent(s): Mr. Bhakti Vardhan Singh, Advocate