Case: K. Gopinathan Nair and Others Vs. State of Kerala

submitted that the CCI was under an obligation to allot the requisite quantity of imported cashewnuts to the local users for whose benefits the goods were imported. But that will not reflect that local user was the importer. Agreement between CCI and local user may give a contractual right to the local user to enforce its demands against CCI and in a given case it may be enforced by specific performance against CCI. That claim, however, has nothing to do with foreign exporter who only deals with CCI as bulk importer of the goods and against whom the local user cannot have any legally enforceable right. All the aforesaid features which are well established on record leave no room for doubt that it is on account of the sale to CCI by foreign exporter that the raw cashew get imported in India and the importer is CCI and not the local user. It is the demand of the local users which prompted the canalising agency like CCI to place orders for import of the quantities concerned. But CCI deals with foreign exporter on its own and gets bulk imports of cashewnuts. It is the sale to the CCI by the foreign exporter or conversely the purchase by the CCI of the raw cashew from the foreign exporter that occasions the movement of raw cashew from African countries to India. The imported cashew remains of the ownership of the importer CCI and only on retirement of documents on payment of value of the allotted cashew by the local users and on their getting the goods cleared from customs that the property in the imported goods concerned would pass from CCI to the local users. Thus there are two clear transactions. One transaction is the import of raw cashew by CCI from foreign exporters. The second transaction which is back-to-back transaction is of sale by the canalising agency like CCI which is the wholesale importer in favour of the localusers for whom the goods are indented. That independent sale which may be based even on a prior agreement of sale by CCI to local users would remain an independent transaction between importer CCI and the local purchaser, namely, the local user. There is no privity of contract between the local users on the one hand and the foreign exporter on the other. These two transactions cannot be said to be so integrally interconnected as to represent one composite transaction in the course of import of raw cashewnuts as tried to be submitted by the learned Senior Counsel for the appellants. On the facts of these cases, therefore, the decisions of the Constitution Benches of this court in Serajuddin case and in the case of Binani Bros. get squarely attracted and as a result these sales by the CCI to the local users go out of the sweep of the exemption provisions engrafted by Section 5(2) of the Central Sales Tax Act. The conclusions to which the Kerala and Karnataka High Courts reached, therefore, cannot be faulted. 20. The alternative contention canvassed on behalf of the appellants by the learned Senior Counsel Shri Poti based on Section 2(ah) of the Central Sales Tax Act which defines "crossing the customs frontiers of India" as crossing the limits of the area of a customs station in which imported goods or exported goods are ordinarily kept before clearance by customs authorities, also cannot be of any avail to the appellants for the simple reason that this amendment was brought on the statute-book much after the relevant assessment years. This amendment which sought to confer a substantial benefit to the local users cannot be said to be a procedural amendment which could have any retrospective effect. On the contrary this substantive provision is of a remedial nature and it cannot have any retrospective effect by implication. The provision is also not expressly made retrospective. As laid down by a three-member Bench of this Court in the case of R. Rajagopal Reddy v. Padmini Chandrasekharan wherein one of us, S. B. Majmudar, J., spoke for the Bench, that it is now well settled that where a statutory provision which is not expressly made retrospective by the legislature seeks to affect vested rights and corresponding obligations of parties, such provision cannot be said to have any retrospective effect by necessary implication. In para 15 of the Report reliance was placed on an a earlier decision of this Court in the case of Garikapati Veeraya v. N. Subbiah Choudhary 2 MLJ (SC) 1 wherein Chief Justice S. R. Das speaking for this Court had made following pertinent observations : "The golden rule of construction is that, in the absence of anything in the enactment to show that it is to have retrospective operation, it cannot be so construed as to have the effect of altering the law applicable to a claim in litigation at the time when the Act was passed." * Consequently it cannot be said that the enactment of a new definition regarding crossing the customs frontiers of India as laid down by Section 2(ab) of the Central Sales Tax Act for considering the liability to pay sales tax could be legitimately pressed in service for deciding the question of sales tax liability of the appellants during the assessment years when such definition was not on the Statute-Book. For all these reasons no case is made out by the appellants for our interference in these cases. With great respect to our esteemed colleague Sujata V. Manohar, J., it is not possible to agree with her conclusion that there is a direct and inseverable link between the transaction of sale and the import of goods on account of the nature of the understanding between the parties as also by reason of the canalising scheme pertaining to the import of cashewnuts. Nor it is possible for us to agree with her finding that these transactions are covered by the exemption provisions of Section 5(2) of the Central Sales Tax Act.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]15. If the aforesaid conditions are satisfied then obviously the transaction of sale or purchase would be in the realm of sale or purchase in the course of import entitling it to earn exemption under Section 5(2) of the Central Sales Tax Act. But if on the contrary the transactions between the foreign exporter and the local users in India get transmitted through an independent canalising import agency which enters into back-to-back contracts and there is no direct linkage or causal connection between the export by foreign exporter and the receipt of the imported goods in India by the local users, the integrity of the entire transaction would get disrupted and would be substituted by two independent transactions, one between the canalising agency and the foreign exporter which would make the canalising agency the owner of the goods imported and the other between the import canalising agency and the local users for whose benefit the goods were imported by the wholesale importer being the canalising agency. In such a case the sale by the canalising agency to the local users would not be a sale in the course of import but would be a sale because of or by import which would not be covered by the exemption provision of Section 5 sub-section (2) of the Central Sales Tax Act16. On the facts of these cases and in the light of the propositions enumerated above it is impossible to accept the contention of the learned Senior Counsel for the appellants that the sales in the present cases effected by the CCI in favour of the local users were in course of import of raw cashew from African countriesConsequently it cannot be said that the enactment of a new definition regarding crossing the customs frontiers of India as laid down by Section 2(ab) of the Central Sales Tax Act for considering the liability to pay sales tax could be legitimately pressed in service for deciding the question of sales tax liability of the appellants during the assessment years when such definition was not on the Statute-Book. For all these reasons no case is made out by the appellants for our interference in these cases. With great respect to our esteemed colleague Sujata V. Manohar, J., it is not possible to agree with her conclusion that there is a direct and inseverable link between the transaction of sale and the import of goods on account of the nature of the understanding between the parties as also by reason of the canalising scheme pertaining to the import of cashewnuts. Nor it is possible for us to agree with her finding that these transactions are covered by the exemption provisions of Section 5(2) of the Central Sales Tax Act27. Thus it is clear that although the canalising agency placed a bulk order for the import of cashewnuts and opened a letter of credit in favour of the foreign sellers, the bulk order so placed was a sum total of the requirements of all the processors of cashewnuts in whose favour allotment orders were issued. The Cashew Corporation of India had from the inception marked separately each lot imported by it in favour of each allottee. It had also in turn, prepared a corresponding set of documentation in favour of the allottee and the allottee was required to open a corresponding letter of credit in favour of the Cashew Corporation of India in respect of the lot being imported on its behalf. The allottees also paid the corresponding insurance a premium for the marine insurance taken out by the Cashew Corporation of India pertaining to the import of cashewnuts.