TARUN AGARWALA, J. - (1.) In this group of writ petitions, the petitioners are challenging the assessment order in so far as it imposes VAT on the dyes, chemicals etc. used by it in the dyeing, colouring and printing of cloth for various traders. For facility, the facts narrated in Writ Petition No.273 of 2014, M/s Chandok Textiles Enterprises Pvt. Ltd. Vs. State of U.P. and others are being taken into consideration.
(2.) The petitioner is a Private Limited Company and is engaged in the process of dyeing, colouring and printing of cloth on job -work basis for various traders within and outside the State of U.P. The controversy regarding the taxability of dyes and chemicals used in colouring, bleaching, dyeing, printing of cloth was engaging the attention of the tax authorities for quite some time. The assessing authority was levying the tax on the dyes and chemicals by treating them to be a deemed sale. According to the traders, there was no deemed sale as there was no transfer of property in the goods and that the dyes and chemicals used were only consumables and were not transferred. It was contended that the dyes and chemicals loose their identity when it was used in the processing of cloth and were, therefore, consumables on which no tax was leviable. In this regard, the Commissioner, Commercial Tax issued a circular dated 26.12.2002 directing all Additional Commissioners that dyes and chemicals, which are being used in the processing of cloths and which do not loose their identity even after use would be exigible to tax under Section 3 -F of the U.P.Trade Tax Act. Based on this circular, a large number of assessing authorities initiated the assessment proceedings against various dealers including the petitioners.
(3.) In this regard, representations were made by some traders as well as by the Northern India Textile Processors Association, in which the petitioners are members before the State Government for an authoritative decision in the matter. The Principal Secretary (Tax and Registration), State of U.P. eventually decided the controversy by an order dated 07.10.2005 holding that there was no deemed sale of dyes and chemicals by the traders. A specific finding was given that dyes and chemicals, which are used for washing, printing and colouring of cloth are consumables and, therefore, there was no liability of tax on the goods, which was consumed and was not passed on to the ultimate purchaser.;