SUJIR VASUDEV NAYAK Vs. STATE OF KERALA

JUDGEMENT

(1.) These Tax Revision Cases raise the question whether the purchases of African raw cashew nuts made by the assessees from the Cashew Corporation of India (for short CCI) are in the course of import and therefore immune from liability to tax under The Kerala General Sales Tax Act

(2.) The argument of the counsel for the assessees Sri. Padmanabhan is that the procedure adopted by the parties namely CCI and the assessees resulting in the allotment of the imported raw cashew nuts to the assessees reflects a transaction inextricably bound up with the import by the CCI in terms of the import licence granted to them by the Government and therefore the purchases made pursuant to the transaction are immune from liability to tax. Dilating on this point it was further argued by the counsel that the CCI has been interposed only as a conduit connecting the assessees with the foreign sellers. This procedure was necessitated on account of the import and export order whereunder only the CCI can import raw cashew nuts 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 brake the link is further clear from the fact that the raw cashew nuts 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 FOB/CIF 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 favour of the CCI. The learned Special Govt. Pleader for Taxes Sri. T. Karunakaran Nambiar on behalf of the Revenue refuted the above arguments. According to the counsel none of the documents would establish that the transactions under which the assessees were to get the imported raw cashewnuts, could be said to be inextricably bound up with the import. Expanding this point he argued thus: The CCI imports the raw cashewnuts from East African countries on the strength of the import licences issued to it by the Controller of Imports and Exports. The raw cashew nuts thus imported would thereafter be purchased by the assessees. One of the circumstance relevant is that CCI should remain as owner of the imported raw cashewnuts upto the time of actual purchase by the assessees from the port where at the ship as per the Bill of lading was to discharge the goods. It is true that separate bills of entry were drawn before the letters of authority enabling the assessees to take delivery of the imported cashew earmarked to them from the port were given. These letters of authority were sent through banks and the assessees received them after making payments. The Customs duty no doubt is paid by the assessees. The said payment under the circumstances must be deemed to be payment on behalf of the CCI.

(3.) The Appellate Tribunal accepted the above contentions of the Revenue and found that the transaction under which the assessees could get delivery of the allotted raw cashewnuts is not immune from liability to tax under the K.G.S.T. Act and consequently upheld the assessments.