Milk exemption for sealed milk products denied, while business activity through agents established tax liability in the State.

Condensed milk and milk powder sold in sealed containers were treated as milk products, not milk itself, so the exemption for milk did not apply under the U.P. Sales Tax Act. The notification distinguished milk from milk products and excluded sealed-container products, which brought the goods within tax. Business activity was also held to exist in Uttar Pradesh where goods were sent into the State and delivery and price realisation were completed through agents or bankers. On that basis, the assessee was regarded as a dealer carrying on business in Uttar Pradesh and was liable to assessment.

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Issues: (i) whether condensed milk and milk powder sold in sealed containers fell within the exemption for milk under section 4(1) of the U.P. Sales Tax Act; (ii) whether the assessee was a dealer carrying on business in Uttar Pradesh within section 2(c) of the U.P. Sales Tax Act.

Issue (i): whether condensed milk and milk powder sold in sealed containers fell within the exemption for milk under section 4(1) of the U.P. Sales Tax Act.

Analysis: The exemption covered milk as an article of daily and universal use. Condensed milk and milk powder were prepared products of milk and were not to be equated with milk itself. The notification exempting milk products also distinguished milk from milk products and excluded products sold in sealed containers. On that basis, condensed milk and milk powder were treated as milk products rather than milk, and the sealed-container exclusion applied.

Conclusion: The exemption did not apply, and the issue was answered against the assessee.

Issue (ii): whether the assessee was a dealer carrying on business in Uttar Pradesh within section 2(c) of the U.P. Sales Tax Act.

Analysis: Business could be carried on in Uttar Pradesh even without a local office or headquarters if part of the business activity was done there. The goods were sent into Uttar Pradesh, and delivery and realisation of price were effected through agents or bankers acting for the assessee. Those acts formed part of the business activity in the State, establishing the necessary business presence.

Conclusion: The assessee was a dealer carrying on business in Uttar Pradesh, and the issue was answered in the affirmative.

Final Conclusion: The goods were not exempt from sales tax, and the assessee was liable to assessment as a dealer carrying on business in Uttar Pradesh.

Ratio Decidendi: A product derived from milk is not necessarily milk for exemption purposes, and a trader carries on business within a State when essential parts of the sales activity are conducted there through agents or other representatives.

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