2014 (5) TMI 799 - HC - VAT and Sales Tax

Exemption from tax - tax on the job work - process of Printing and dyeing of cloth - dyes and colour used - Whether on the facts and in the circumstances of the case the Trade Tax Tribunal was legally justified in exempting the dealer from payment of tax levied by the assessing authority under Section 3F of the Act - Held that - 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 petitioners were allowed - Following decision of M/s Super Fine Processors Pvt. Ltd. Vs. State of U.P. and Others 2013 (6) TMI 482 - ALLAHABAD HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of whether dyes and colors used in the printing and dyeing of cloth remain as goods.
2. Determination of whether the use of colors and dyes in printing of cloth constitutes a transfer of property in goods.
3. Justifiability of the Trade Tax Tribunal's exemption of a dealer from tax payment under Section 3F of the Act.

Analysis:
1. The High Court addressed the first issue by referring to a Division Bench Judgment in a previous case involving similar facts. The court highlighted that the use of color, dye, and chemicals in processes like bleaching, dyeing, and printing of cloth is considered consumable and not transferred as goods. This interpretation was based on the decision taken by the Principal Secretary, Tax and Registration Department, Government of U.P. on 7.10.2005, which was deemed binding on the Assessing Authorities within the state. Consequently, the court ruled that the dyes and colors used in the mentioned processes do not retain the character of goods. Therefore, the questions raised regarding the existence of dyes and colors as goods were answered against the Revenue.

2. The second issue revolved around whether the use of color and dyes in printing cloth amounts to a transfer of property in goods when the printed cloth is later sold to customers. The court's decision in the referenced case established that there is no transfer of goods involved in such activities. The court emphasized that the Assessing Authorities are obligated to adhere to the decision made by the Principal Secretary, Tax and Registration Department, as per the 2005 ruling. Consequently, the court dismissed the revision, indicating that the questions raised in this matter were squarely covered by the previous judgment, and the Tribunal's decision to exempt the dealer from tax payment was upheld.

3. The final issue pertained to the Trade Tax Tribunal's decision to exempt the dealer from tax payment under Section 3F of the Act. The High Court, following the precedent set by the Division Bench Judgment, upheld the Tribunal's decision and dismissed the revision. The court's ruling was based on the interpretation that the use of color, dye, and chemicals in the specified processes does not constitute a transfer of property in goods, thereby justifying the exemption from tax payment as determined by the Tribunal.

In conclusion, the High Court's judgment in this case clarified the legal position regarding the treatment of dyes and colors used in textile processes, emphasizing that such consumables do not amount to a transfer of goods. The decision provided a clear precedent for Assessing Authorities to follow in similar cases, ensuring consistency in tax assessments related to these activities.