Aristo Printers Pvt. Ltd. v. Commissioner of Trade Tax 2025 INSC 1188 - Art. 366 Constitution - Works Contract Taxation

Constitution of India - Article 366- Taxation of goods transferred under works contracts - Position of law after the enactment of the Forty-sixth Amendment of Constitution: a. Vide Article 366(29-A)(b), the States can only tax the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract and not the works contract itself; b. States cannot exercise the power conferred upon them under Article 366(29-A)(b) dehors the restrictions imposed under Article 286 of the Constitution and the Act, 1956 (specifically Sections 3, 4, 5, 14 and 15 respectively); c. Indivisible works contracts are now, by virtue of the legal fiction created under Article 366(29-A)(b), divided into two parts, one for the sale of goods and the other for the supply of labour and services; d. A transfer of property in goods under Article 366(29-A)(b) is deemed to be a sale of the goods. Article 366(29-A)(b) serves to bring transactions where essential ingredients of “sale” defined in the Act, 1930 are absent within the ambit of sale or purchase for the purposes of levy of sales tax. In other words, the transfer of movable property in a works contract is deemed to be a sale even though it may not be considered as “sale” within the meaning of the Act, 1930; e. The term “works contract” in Article 366(29-A)(b) takes within its fold all genres of works contracts and is not restricted to one particular specie of contract to provide for labour and services alone; and f. The dominant nature test is no longer applicable and has lost its significance where transactions are of the nature contemplated in Article 366(29-A). (Para 33)

U.P. Trade Tax Act, 1948 - Section 3F(1)(b) - Whether the ink, chemical and other processing materials are liable to the levy of tax ? In order to sustain a levy of tax under Section 3F(1)(b) of the Act, 1948, three conditions must be fulfilled: (i) there must be a works contract; (ii) the goods should have been involved in the execution of the works contract; and (iii) the property in those goods must be transferred to a third party either as goods or in some other form-SC held: in the facts of the present case all three conditions required to sustain a levy of tax under Section 3F(1)(b) of the Act, 1948, are fulfilled : (i) a works contract exists for printing of lottery tickets; (ii) ink and chemicals have been involved in the execution of the works contract; and (iii) the property in the ink and chemicals has been transferred in execution of the works contract. Consequently, the appellant is liable to pay tax under Section 3F(1)(b) of the Act, 1948 on the ink and processing material. (Para 73)