2013 (1) TMI 825 - HC - VAT and Sales Tax

Tax on Job work - Bleaching, dyeing, processing and printing of gray cloth on the ground that there is no transfer of any goods involved in such activity - Held that - Similar controversy came up for consideration before this court in Writ Petition No. 1683 of 2007 ( M/s. Super Fine Processors Pvt. Ltd. vs. State of U.P. and Others 2013 (6) TMI 482 - ALLAHABAD HIGH COURT and four other connected writ petitions and this court vide judgment and order dated 10.1.2013 had held that the decision taken by the State Government on 7.10.2005, on the representation made by two such similarly situated persons as also the Northern India Textile Processors Association would be binding on the Assessing Authority within the State of U.P. wherein it has been held that colour, dye, chemicals, etc. used in bleaching, dyeing, processing and printing of gray cloth are consumable and are not transferred and not included in the definition of sale and the writ petitions were allowed - Petition allowed.

Summary

Issues:
Challenging imposition of tax on job work involving bleaching, dyeing, processing, and printing of gray cloth due to the absence of goods transfer.

Analysis:
The High Court addressed multiple writ petitions challenging the Assessing Authority's decision to impose tax on job work involving processes like bleaching, dyeing, processing, and printing of gray cloth. The core issue revolved around whether such activities constituted a sale involving the transfer of goods. The Court referred to a previous judgment in M/s. Super Fine Processors Pvt. Ltd. vs. State of U.P. and Others, where it was established that consumable items like color, dye, and chemicals used in these processes are not transferred and do not fall under the definition of sale. The Court upheld the decision taken by the State Government on 7.10.2005, following which the Assessing Authorities were directed to adhere to this decision. Consequently, the writ petitions were allowed, and the Assessing Authorities were instructed to act in accordance with the 2005 decision.

The Court, in line with the precedent set in the mentioned case, ruled in favor of the petitioners. The judgment emphasized that the Assessing Authorities must abide by the decision made by the Principal Secretary, Tax and Registration Department, Government of U.P. on 7.10.2005. This directive aimed to ensure uniformity in the treatment of tax liabilities related to the use of color, dye, chemicals, etc., in processes like bleaching, dyeing, processing, and printing of gray cloth. As a result, any orders imposing tax on the mentioned consumables were set aside, providing relief to the petitioners and establishing a clear legal precedent for similar cases in the future.

In conclusion, the High Court's judgment in these writ petitions clarified the tax treatment of job work activities involving bleaching, dyeing, processing, and printing of gray cloth. By aligning with the previous decision and emphasizing the non-transferable nature of consumable items used in these processes, the Court provided a definitive ruling that guided the Assessing Authorities in their tax assessments. This case sets a precedent for similar disputes and ensures consistency in interpreting tax liabilities related to such job work activities within the state of U.P.