Court upholds U.P. Sales Tax Act, assesses tax on Calcutta depot sales, citing nexus with U.P. state.

The court ruled in favor of the Department, affirming the validity of the clause in the U.P. Sales Tax Act and holding the assessee liable to pay tax on sales of oils and soaps from their Calcutta depot in 1948-49. The court emphasized the nexus between the sales and the state of U.P., allowing for taxation based on the principles established by the Supreme Court.

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Issues:
1. Validity of clause (ii) of Explanation II to section 2 (h) of the U.P. Sales Tax Act.
2. Liability to pay tax in respect of sales of oils and soaps in the year 1948-49 from a depot at Calcutta.

Analysis:
1. The first issue pertains to the validity of clause (ii) of Explanation II to section 2 (h) of the U.P. Sales Tax Act. The court compared this clause with a similar provision in the Bihar Sales Tax Act, which had been upheld by the Supreme Court in a previous case. The Supreme Court had ruled that the power of the State Legislature to impose sales tax was not limited to sales within the state but could extend to sales outside the state if there was a nexus between the transaction and the taxing state. The court concluded that since the provision in the U.P. Sales Tax Act mirrored the valid provision in the Bihar Act, the first issue should be answered in the negative, affirming the validity of the clause.

2. The second issue involves the liability to pay tax on sales of oils and soaps from a depot at Calcutta in the year 1948-49. The court applied the principles laid down by the Supreme Court, which stated that if goods were produced or manufactured in the taxing state and sold by the same person outside the state, the state had the power to tax the sale based on the nexus between the sale and the taxing state. In this case, the goods were manufactured in U.P. and sold from a depot in Calcutta. As there was a nexus between the sale and the state of U.P., the court held that the second issue should be answered in the affirmative, indicating that the Department was entitled to costs from the assessee.

In conclusion, the court ruled in favor of the Department on both issues, upholding the validity of the relevant clause in the U.P. Sales Tax Act and affirming the liability of the assessee to pay tax on the sales of oils and soaps from their depot at Calcutta in the specified year.

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