Asia Sugar & Chemical Co. Vs State of Karnataka & Ors. (Supreme Court of India)
The Supreme Court considered whether imported sugar was covered by the exemption for “sugar” under the Fifth Schedule to the Karnataka Sales Tax Act, 1957 (KST Act), and whether Karnataka Act No. 5 of 2001 could retrospectively restrict that exemption to sugar “produced or manufactured in India.” Asia Sugar & Chemical Co. and M/s Indian Sugar and General Export Import Corporation Ltd. had dealt in imported sugar during the relevant periods and had proceeded on the basis that imported sugar was exempt. Their original assessments had granted the exemption, and the Department itself had relied on the judgment in State of Kerala and Another v. State Trading Corporation of India Ltd. The 2001 amendment inserted the words “produced or manufactured in India” after “Sugar” and deemed them to have always been inserted. Reassessment proceedings were subsequently initiated, including proceedings against Asia Sugar & Chemical Co. for the period 03.12.1994 to 31.03.1995, resulting in tax of Rs.90,25,293 on transactions aggregating to Rs.9,02,52,932. The Single Judge of the Karnataka High Court had struck down the retrospective operation of the amendment under Article 19(1)(g), holding that it imposed an unexpected and unreasonable burden on dealers who had not collected tax. The Division Bench reversed that decision and upheld the retrospective amendment.
