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TMI Blog1991 (11) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... essitated on account of the import and export order whereunder only the CCI can import raw cashewnuts from foreign countries. The inextricable link spoken above is not broken by the introduction of the CCI. That it is not possible by the introduction to break the link is further clear from the fact that the raw cashewnuts imported, cannot be diverted to any other purchasers than the assessees from whom orders for supply of imported raw cashewnuts have been taken. The above position is further established by the fact that the contract between the foreign seller and the CCI is on f.o.b/c.i.f basis and as such the property in the goods would pass on shipment. Lastly it was argued that even assuming that the assessees did not have any direct contract with the foreign seller for the purchase of the raw cashewnuts, the privity of contract between them and the foreign seller must be presumed because the canalising agent, i.e., the CCI, is the agent of the assessees. In support of the above contentions the counsel relied on some of the terms in the contract between the assessees and the CCI and the CCI and the foreign seller. He also relied on the clauses in the import licence issued in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument can be taken cognisance of requires to be considered in the light of the order of the Supreme Court rejecting the special leave application, the Revenue had filed against the said judgment. The Supreme Court has stated that it was not necessary to consider the merits of the case at that stage. This observation was made, presumably for the reason, that, since the appeals have been remanded to the Tribunal for a fresh consideration, the so-called propositions of law cannot be said to conclude the questions one way or the other, raised by the parties. On going through the judgment one can opine without fear of contradiction that this Court was of the view that the issues involved in the case have not been dealt with by the Tribunal in the right perspective, i.e., in the light of the principles enunciated by the apex Court and the various High Courts and accordingly the common order of the Appellate Tribunal was set aside and the appeals were remanded to the Tribunal for fresh disposal. We therefore are of the view that the said judgment cannot be said to conclude the matters. We accordingly would go into the merits of the competing contentions of the parties stated supra. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gle transaction and the parties to that transaction were the assessees, the CCI and the foreign seller. The intervention of the statutory intermediary, the CCI, with the only right to import and allot the raw cashewnuts to the assessees, would not affect the real nature of the transaction, based on which the assessees were to import the raw cashewnuts directly from the foreign seller. That it is so can be seen from the facts, namely, that the allottees are the assessees, that the invoices and the bill of lading contain the specific marking disclosing the identity of the assessees, that the import is for the benefit of the assessees only, that the assessees shall not divert the imported goods for any other purpose and that the entire processed imported nuts, the assessees shall export to foreign countries. The existence of these facts is not disputed because they are all borne out by records to which the assessees and CCI were parties. May be that the allotment of the quota to each of the assessees on the arrival of the raw nuts is on the basis of contract between the assessees and CCI. These contracts for the allotment of the raw nuts were necessitated on account of the Import and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n seller and ending with the delivery of the goods to a common carrier for transport into the country by land or sea. Such a purchase cannot be dissociated from the import and therefore the said purchase and the resultant import alone would form part of the transaction occasioning the import. It cannot therefore be said that a purchase of the goods, after the importation of the same into the country has been completed, is inextricably connected with the transaction which occasioned the import. Affirming this view, discernible from State of Travancore-Cochin v. Bombay Company Ltd. [1952] 3 STC 434 (SC) and State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205 (SC) the Supreme Court in Mod. Serajuddin's case [1975] 36 STC 136 has further stated thus: "The contention on behalf of the appellant that the contract between the appellant and the Corporation and the contract between the Corporation and the foreign buyer formed integrated activities in the course of export is unsound. The crucial words in the section are that a sale or purchase of goods shall be deemed to take place in the course of export of the goods only if the sale or purchase occasions such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to back contracts. In export trade it is not unnatural to find a string of contracts for export of goods. It is only the contract which occasions the export of goods which will be entitled to exemption. The appellant was under no contractual obligation to the foreign buyer either directly or indirectly. The rights of the appellant were against the Corporation. Similarly the obligations of the appellant were to the Corporation. The foreign buyer could not claim any right against the appellant nor did the appellant have any obligation to the foreign buyer. All acts done by the appellant were in performance of the appellant's obligation under the contract with the Corporation and not in performance of the obligations of the Corporation to the foreign buyer." The various contentions raised by the counsel for the assessees, which contentions are virtually identical with the contentions dealt with by the Supreme Court in the above excerpt therefore have lost their validity and relevance. A catena of decisions including Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 STC 473 (SC), Coffee Board v. Joint Commercial Tax Officer [1970] 25 STC 528 (SC), Ben Gor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods. Further, if such sales do not qualify as sales in the course of export, they would be liable to State sales tax and there would be a corresponding increase in the price of the goods. This would make our exports uncompetitive in the fiercely competitive international markets. It is, therefore, proposed to amend, with effect from the beginning of the current financial year, section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the territory of India shall also be deemed to be in the course of such export if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to, such export." From the discussion above it can be inferred without fear of contradiction that even today Serajuddin case [1975] 36 STC 136 (SC) holds the field in so far as the same relates to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of the said raw cashewnuts to them by the CCI occasioned the import. (1) The licence and sub-licence to import raw cashewnuts stood in the name of the CCI [See Swaika Oil Mill's case [1977] 40 STC 367 (SC)]. 10.. We therefore are of the view that the purchases in respect of which the assessees claim exemption are not purchases in the course of import and they therefore are exigible to tax under the Kerala General Sales Tax Act. A similar view is expressed by the Karnataka High Court (see Cashew Corporation of India Ltd. v. State of Karnataka [1986] 63 STC 90). With respect we agree with the ratio discernible from this decision. It is relevant in the context to note that the decision was rendered after considering identical contentions raised by the parties. The transactions involved in that case were identical. 11.. Finding it difficult to grapple with the situation brought about by the principles declared by the Supreme Court, discernible from Serajuddin's case [1975] 36 STC 136, the counsel for the assessees argued that in all these cases the purchases by the assessees from the CCI had been effected by transfer of documents of title to the goods, to the assessees before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in this context to make specific reference to a notification issued by the Central Government. This notification S.R.O. 1683 is dated August 6, 1955. As per this notification the Central Government have defined the customs frontiers of India as the boundaries of India including territorial waters of India. It therefore follows that the expression "customs frontiers of India" in section 5 of the Central Sales Tax Act at the relevant time must be construed in accordance with the notification aforesaid read with the proclamation of the President of India dated September 30, 1967. So applying the definition of customs frontiers of India, it is clear that in the case on hand since the purchases by the assessees by transfer of documents of title, assuming letters of authority constitute the documents of title, were made only long after the raw cashewnuts had reached the port, the same must be held to be after the goods crossed the customs frontiers of India. If so, the argument of the counsel that the question as to what does the expression "customs frontiers of India" in section 5 of the Central Sales Tax Act mean, requires to be decided in the light of the definition contained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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