Territorial nexus in sales tax upheld where goods produced in the State were deemed sold there for taxing completed sales.

The amended definition of "sale" in the Bihar Sales Tax Act, which deemed goods produced or manufactured in Bihar to be sold in the State for tax purposes, was treated as constitutionally valid because the levy applied only to completed sales. The Provincial Legislature's taxing power was upheld on the basis of a real and substantial territorial nexus between Bihar and the transaction. Production of tea in Bihar provided sufficient connection for taxing the later sale of that tea, even though the contract, transfer of title, or delivery occurred outside the State. The provision was therefore valid as applied to tea produced in Bihar and sold elsewhere.

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Issues: Whether the amended definition of "sale" in section 2(g) of the Bihar Sales Tax Act, as introduced by Bihar Act VI of 1949, was constitutionally valid and whether sales tax could be levied on tea produced in Bihar but sold outside the State.

Analysis: The amended provision created a legal fiction by treating goods produced or manufactured in Bihar as sold in Bihar for purposes of the Act, even if the delivery or contract of sale occurred elsewhere. The tax was held to be imposed on a completed sale and not on a mere executory or forward contract. The power of the Provincial Legislature under section 100(3) of the Government of India Act, 1935, read with item 48 of List II of the Seventh Schedule, was construed as permitting a law for the Province where there existed a real and sufficient territorial nexus between the taxing State and the transaction. Production of tea in Bihar was treated as a substantial territorial connection with the later sale of that tea, so the levy was not invalid merely because the contract, transfer of title, or delivery took place outside Bihar.

Conclusion: The amended section 2(g) was constitutionally valid, and the assessment of sales tax on the tea was upheld in favour of the Revenue.

Ratio Decidendi: A sales tax law is within legislative competence where there is a real and substantial territorial nexus between the taxing State and the transaction, and a provision deeming goods produced in the State to have been sold there is valid if it taxes only completed sales and not forward contracts.

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