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Karnataka High Court
Shamanur Kallappa and Sons - Appellant
Versus
State of Karnataka - Respondent
Decided On : 05-26-03
W.P. : 7089 of 2002
KARNATAKA SALES TAX ACT, 1957 - Section 5(3), Entries 31B and 51 of Schedule V as amended by Act 5 of 2001 -Insertion of the words "produced or manufactured in India" with retrospective effect, Serial No. 18A to part S of Second Schedule and Circular No. 28/97-98 dated 25/3/98 -Exemption tax on Sugar in all forms -Sugar and Sugar candy brought under exemption -Circular issued -Sugar imported from foreign countries into Karnataka -made leviable at 4% -assessments completed -ratio in 114 STC 7 -applied -assessment orders annulled.
[H. L. Dattu, J.] - In the present case, in view of the circular issued by the Commissioner of Commercial Taxes dated 25.3.1998, the assessing authorities under the Act have initiated and completed the assessment, re-assessment and revisional proceedings and have quantified the tax liability of the petitioner by levying tax on imported sugar under Section 5(3)(a) read with Sl.No. 18A of Part S of second schedule. They are justified in doing so, but in view of the conclusion reached by the Court relying on the law declared by the Apex Court, it is difficult to sustain those orders. Therefore, those orders require to be annulled by the Court by issuing appropriate writ.
Cases Referred: Relied & Followed: 114 STC 7; AIR 1985 SC 1041; (1921) 1 KR 64; AIR 1950 Mad 521; AIR 1957 SC 657; AIR 1957 SC 540; AIR 1976 SC 1471; AIR 1977 SC 522; (1984) 1 SCC 206; AIR 1989 SC 1247; (1995) 2 SCC 630; 31 STC 190; 152 ITR 308.
Constitutionality of retrospectivity
Article 19 - Articles 19(1)(g) & 265, Karnataka Sales Tax Act, 1957 -Section 5(4) and Entry 31B of Schedule V (as amended by Act 9/2001) -Sugar imported into the State from foreign countries -made leviable retro- spectively at 4% -constitutional validity -retrospective operation -declared as unreasonable and unconstitutional -consequently struck down.
[H. L. Dattu, J.] - Retrospective operation of taxing statute normally done to either to validate a legislation or legislation which try to effect minor repairs to the earlier existing statutes. In the present case for the first time, tax is sought to be imposed on imported sugar by inserting the words produced and manufactured in India after the word sugar in Entry 31-B of fifth schedule retrospectively from the inception of the statute itself. Such imposition will have considerable unexpected tax burden on the dealer. The retrospective levy made by the impugned legislation is unreasonable and unconstitutional and violative of Article 19(1)(g) of the Constitution and therefore, the Amended Act requires to be struck down in regard to its retrospective operation.
Cases Referred: AIR 1985 SC 1041; (1921) 1 KR 64; AIR 1950 Mad 521; AIR 1957 SC 657; AIR 1957 SC 540; AIR 1976 SC 1471; AIR 1977 SC 522; (1984) 1 SCC 206; AIR 1989 SC 1247; (1995) 2 SCC 630; 31 STC 190; 152 ITR 308.
Relied on & Followed: 114 STC 7.
( 1 ) PETITIONER is a registered dealer both under Karnataka and Central sales Tax Act, 1957, carrying on, among other activities the business of sale of imported sugar in the State of Karnataka.
( 2 ) PETITIONER's main grievance in these petition, appears to be the insertion of the words "produced and manufactured in India" immediately after the word Sugar' in the Entry 31-B of fifth schedule to the Act as it existed prior to April 1998 with a retrospective deeming date by the State Legislature by Karnataka Taxation Laws (Amendment) Act 2001 (Act No. 5 of 2001 ).
( 3 ) THE Sale of goods specified in the fifth schedule are exempt from payment of tax under State Sales Tax Act, subject to conditions and exceptions, if any, set out therein.
( 4 ) ENTRY 31-B of the fifth schedule of Karnataka Sales Tax Act, 1975, herein after referred to as KST Act, which has been in force right from 1. 4. 1988 in different forms is as under:- "sugar other than Sugar candy, confectionery and the like. (Act No. 31 of 1958. 1. 4. 1958 to 31. 3. 1986) "sugar including sugar candy, but excluding confectionery and the like. " (Act No. 9 of 1986. 1. 4. 1986 to 31. 3. 1992 ). "sugar as described from time to time in column 3 of the first schedule to the Additional Duties of Excise (Goods of Special importance) Act, 1957, but excluding confectionery and the like. " (Act No. 4 of 1992: with effect from 1. 4. 1992 ).
( 5 ) BY the Karnataka Taxation Laws (Amendment) Act, 2001 (Act no. 5 of 2001), the entries relating to Entry 31-B is recasted and the same is as under:- "sugar (produced or manufactured in India) as described from time to time in column 3 of the first schedule to the Additional duties of Excise (Goods of Special importance) Act, 1957, but excluding confectionery and the like". The amendment specifies that the words " (produced or manufactured in Inda)" shall be deemed always to have been inserted.
( 6 ) SUGAR and Sugar preparations' finds a place at serial No. 18a to part `s' of second schedule of the Act. Goods coming under this schedule attract tax at the point of first sale in the State. "sugar including Khandasari Sugar and Sugar preparations is also included in the fourth schedule. Goods coming under this schedule are treated as `declared Goods' in respect of which tax is levied under Section 5 (4) of the Act.
( 7 ) THE purpose and object for carrying out the impugned amendment appears to be the proposal made by the Commercial taxes department and the Budget Speech of Hon'ble Chief Minister and Minister for Finance. The Proposal made by the department is extracted and it is as under:- "23. To provide for levy of tax on imported textiles, sugar and tobacco and tobacco products (Amendment of Fifth Schedule):- as per the agreement, the States have with the Union government, the State has also agreed for levy and collection of additional Duty of Excise in lieu of sales tax under the Additional duties of Excise (Goods of Special Importance) Act, 1957, on textiles, sugar and tobacco and its products; and the Additional duty of Excise so collected is shared amongst all the States. Pursuant to this agreement, the State has exempted textiles, sugar and tobacco and its products, which are subject to Additional duty of Excise. The Union, as per the Constitution has power to levy Duties of Excise on `tobacco and other goods manufactured or produced in India'. Consequently the Union's power to levy additional Duty of Excise (in lieu of sales tax)' on textiles, sugar and tobacco and its products is also limited to such goods manufactured or produced in India'. Thereby the State is empowered to levy sales tax on textiles, sugar and tobacco and its products imported from outside the country and such levy by the State of Tamil Nadu has been upheld by the Court. However, as per the present entries in the Fifth Schedule to the Act exempting textiles, sugar and tobacco and its products which attract Additional Duty of Excise (in lieu sale ta
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