JUDGMENT
Dattu, J.
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 unden
“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 & 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 tax) do not specifically exclude goods imported from outside the country, levy of sales tax on such imported goods has been disputed. Hence, in order to remove doubts in this regard it is suggested to suitably amend the relevant entries in the Fifth Schedule.”
8. In the Budget Speech made by Hon’ble Chief Minister and Minister for Finance on the floor of the Assembly, dated 26th day of March 2001, it is stated as under:-
"172: In order to remove ambiguity, the entries relating to the following commodities would be amended suitably I. xxx xxx xxx II. xxx xxx xxx III. Sugar, textiles, tobacco and tobacco products when imported from outside the country. IV. xxx xxx xxx" 9. The statement of objects and reasons for legislating Karnataka Act No. 5 of 2001, it is stated, that, it is to give effect to the proposals in the Budget Speech by the Hon'ble Chief Minister and Minister for Finance
10. Under Entry No. 31-B of the Fifth Schedule. ‘Sugar’ was exempt in all its forms, other than Sugar candy, confectionery and the like. Then there was slight change made in the entry by Karnataka Act No. 9 of 1986, and in that, Sugar and Sugar Candy in all its forms was exempt from payment of tax, other than confectionery and the like and this was up to 31.3.1992. By Karnataka Act No. 4 of 1992. Entry 31-B is amended and in that legislature has incorporated the Description of ‘Sugar’ as provided in column 3 of First Schedule to the Additional Duties of Excise (Goods of Special Important) Act, 1957. The Schedule to this Act describes several commodities; ‘Sugar’ is one of them. The intendment of the legislature seems to be whatever goods that are described in the first schedule to the Act should be exempted from the purview of taxes under the State Act, as the goods are of special importance.
11. The Commissioner of Commercial Taxes for the first time in the year 1998, has issued a circular No. 28/97-98 dated 25.3.1998 and in that it is made known to the assessing authorities and Traders, that ‘Sugar’ imported into Karnataka from forming countries attracts tax liability on sales made within the State at 4% as per Section 5(3)(a) of the Act read with Serial No. 18A of Part ‘S’ of Second Schedule. Taking clue from this circular, assessments, reassessments and revisions are initiated and completed by the authorities under the Act, by bringing into the tax net the sale of imported sugar within the State.
12. This entry had created a lot of confusion not only in the minds of tax collectors, but also the tax payers. The department’s view was and continues to be, that, since the imported sugar does not suffer any excise duty under the provisions of Additional Duties of Excise Act, the State is empowered to levy sales tax and is ineligile for exemption from tax under fifth schedule. However, the stand of the assesses is that, since the description of sugar in the Additional Duties of Excise Act is incorporated in the fifth schedule to the Act, the imported sugar is also exempt from levy of sales tax to me it appears, this confusion is now set at rest in view of the law declared by Apex Court in the case of STATE OF KERALA V. STATE TRADING CORPORATION OF INDIA LIMITED, 114 STC 7 . In the said decision the Court was considering the effect of incorporation of description of ‘Sugar’ in Excise Act in Kerala General Sales Tax Act. The only argument that was advanced by learned Counsel for the State of Kerala before the Court was that excise duty are imposable only upon goods which are produced or manufactured in India and therefore the sugar that is exempt from the levy of tax under the Sale Tax Act is only such sugar as has been produced in India and not imported sugar. The Court while repelling this contention did hold that the definition of sugar in the first schedule to the Excise Act has been incorporated in Schedule III to the said Act and the definition must, therefore, be read as it stands and so read, all sugar whether imported or otherwise, is not liable to tax under the said Act. While dealing with the issue, the Court was pleased to observe as under:-
“3. Schedule III to the said act enumerates goods that are exempt from the levy of tax thereunder. Entry 5 therein reads thus:
“Sugar as defined in Item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944”.
Sugar is defined in the First Schedule to the Central Excises and Salt Act, 1944, under entry 1 thus:
Sugar produced in a factory ordinarily using power in the course of production of sugar.
‘Sugar’ means any form of sugar in which the sucrose content, if expressed as a percentage of the material dried to constant weight at 105° centigrade, would be more than ninety”.
4. Having regard to the definition, it is plain that every grain of sugar, whether imported or produced in India, is exempt from the levy of tax under the said Act, provided that it has been produced in a factory ordinarily using power in the course of production of sugar.
5. The argument on behalf of the appellants is based upon entry 84 of List 1 of the Seventh Schedule to the Constitution wherein provision is made for the levy of duties of excise on “goods manufactured or produced in India…” Emphasis is laid on the fact that duties of excise are imposabie only upon goods which are manufactured or produced in India. The submission of learned Counsel for the appellants is that the definition in the said Act must also be so read and that, therefore, the sugar that is exempt from the levy of tax under the said Act is only such sugar as has been produced in India and not imported sugar. We are unable to accepted sugar. We are unable to accept the contention. The definition of “sugar” in the First Schedule to the Excise Act has been incorporated in Schedule III to the said Act. The definition must, therefore, be read as it stands and, so read, all sugar, whether imported or otherwise, is not liable to tax under the said Act if produced in a factory ordinarily using power in the course of production of sugar.”
13. It is clear from the aforesaid decision of the Apex Court that if the legislature has thought it fit to describe ‘Sugar’ by incorporating the description found in the Central Excises and Salt Act in the schedule which provides for goods exempted from tax under the Act, the definition must be read as it stands. The principle evolved by the Apex Court, in my view would squarely apply for interpreting Entry 31-B of the fifth schedule as it existed earlier. The legislature while amending Entry 31-B of the fifth schedule by Act No. 4 of 1992 has described sugar by incorporating the definition of ‘Sugar’ found in column 3 of the first schedule to the Additional Duties of Excise Act. Therefore, the definition requires to be read as it stands and if so read, even the imported sugar would come within Entry 31-B of the fifth Schedule and therefore exempt from payment of sales tax, if produced in a factory ordinarily using power in the course of production of sugar.
14. 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 SI. No. 18A of Part “S* of second schedule. They are justified in doing so, but in view of the conclusion reached by me relying on the law declared by the Apex Court, it is difficult to sustain those orders. Therefore, those orders require to be annulled by this Court by issuing appropriate Writ.
15. Now the second question that requires to be considered is, what is the effect of the impugned legislation? If the answer is only to bring to tax ‘the sale of imported sugar’ in the State within the tax net of the State’s sales tax legislation, then the next question would be, does it answer the components which enter into concept of tax which would satisfy the requirements of Article 265 of the Constitution?
16. The question will have to be answered with reference to the principle of interpretation applicable to a taxing statute. But before that, let me just discern what the legislature intends to do by the impugned amendment that to with a retrospective date. The legislature not by an express but necessary intendment by incorporating the words ‘produced or manufactured in India’ intends to exclude imported sugar from the purview of entry 31-B of the fifth schedule right from the inception of the entry itself by using the expression “shall be and shall be deemed always to have been inserted”. The purpose and object of the impugned amendment seems to be to bring to tax the imported sugar from an anterior date and thereby impose a new burden and also to affect the vested rights of a dealer in the imported sugar, but without enacting an express enactment to levy tax on imported sugar from an anterior date or making any express provision to exclude imported sugar from the purview of entry 31-B of the fifth schedule. A tax law can be valid only if it satisfies the requirements of Articles 265 of the Constitution. The amplitude of Article 265 has been explained by Apex Court in GOVIND SARAN GANGA SARAN V. SALES TAX COMMISSIONER, STATE OF KERALA V. STATE TRADING CORPORATION OF INDIA LIMITED, wherein it is said:-
“The components which enter into the concept of a tax are well known, the first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is the clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed and fourth is the measure or value to which the rate is applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law.”
17. Reference can be made to the often quoted passage relating to construction of taxing statute in cape brandy syndicate v. Inland revenue commissioner, (1921) 1 K.R. 64.
“In a taxing Act, one has to look merely what clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption, nothing to be read in, nothing to be implied. One can look fairly at the language used.”
18. In the provincial GOVERNMENT OF MADRAS V. NEELIVEERACHANDRAPPA AND ORS. , a Division Bench of Madras High Court was pleased to observe;
“33. The Act is not a model of good drafting and both the provisions of the Act and the rules framed thereunder have been the subject of frequent amendments. The few reported decisions have not served to clarify the exact meaning and scope of the charging provisions of the Act. In view of the contentions advanced by the learned Counsel on both sides, it is necessary to state at the outset that the Act being a fiscal enactment, the Court is bound to give a fair and reasonable construction to its language without leaning to the one side or the other, remembering at the same time, that no tax can be imposed on citizens without words in the Act clearly showing an intention to levy the burden on them. It is a sound and well recognized principle that a “taxing statute must impose a charge in clear terms or fail, since it is to be construed contra proferentum” to quote the words of Lord Sumner in Levene v. Ireland Revenue Commissioners, 1928 A.C. 217 at p. 228: (97 L.J.K.B 377). It is necessary that this principle should on occasion be reasserted and this is such an occasion. The argument of the learned Advocate General was in effect an invitation to the Court to strain the language of the Act for the purpose of creating a liability to tax not imposed by plain terms. Taxation cannot be imposed by analogy or by implication or by resort to some kind of cypres doctrine. If a lacuna or defect appears. The gap can be filled only by the Legislature and not by those responsible for the collection of revenue or by the Courts”.
Further the Court was pleased to observe:
“In construing a taxing enactment very little weight attaches to the argument that because a specific exemption from tax is found in it, other cases not specifically exempted must be deemed to have been charged “to tax. Such exemptions are often introduced under the influence of excessive caution to quiet the fears of the timid and the unduly apprehensive. Ex pressio unius will not be exclusio alteria in such cases.”
19. In Re. A.V. FERNANDEZ V. STATE OF KERALA, the Supreme Court was pleased to observe:
“It is no doubt true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter.”
20. Keeping in view the legal principles indicated above, let me consider the issue that I have raised for my consideration. The legislature by the impugned amendment has introduced retrospectively a novel method to exclude imported sugar from the purview of entry 31-B of fifth schedule and thereby, by necessary implication intends to bring “imported sugar” under SI. No. 18A of Part ‘S’ of second schedule and levy tax at 4% under Section 5(3)(a) of the Act for the past period. The rule in general firstly is, there cannot be any taxation by implication and no tax can be imposed on the citizens without words clearly showing an intention to levy the burden on them and secondly, where the purpose and the object of the Act is to affect a vested right or to take away an existing right or create a new obligation or impose a new liability the statute should specifically provide for it. A fresh liability cannot be created by a possible intendment of the amended statute, particularly when it comes to taxing statutes. Unless the terms of the statute so provide in clear and unambiguous, retrospective operation cannot be given to an amended provision so as to take away an existing right or impose a new liability. In the absence of anything in the enactment to show that the legislature intended to levy tax on imported sugar for the past period, it cannot be construed that the present amendment would alter or deny the benefit of tax exemption to the imported sugar for the past period extended by judicial interpretation of the word ‘Sugar’. The taxing provision will have to be strictly interpreted and if the Legislature intends to impose any tax that intention must be made clear by the language employed in the Statute and it cannot be by implication or analogy. In finding out the intention of the Legislature in the matter of imposing in the matter of imposing tax, the Courts cannot travel beyond the words of the Section. Therefore, inspite of the impugned amendment in the absence of any express provision in the impugned legislation itself imported sugar cannot be taxed under the Act from an anterior date.
21. In these petitions it is highlighted that inclusion of the words “produced or manufactured in India” after the word ‘Sugar’ in Entry 31-B of the fifth schedule with a retrospective date and thereby impliedly denying the benefit of exemption on ‘imported sugar” retrospectively by the impugned amended provision is unreasonable and unconstitutional being opposed to Article 19(1)(g) of the Constitution.
22. The learned Senior Counsel Sri Sarangan would submit that the impugned amendment is not in the nature of validating a provision declared as illegal, invalid or inoperative by the Courts. Therefore, firstly the principles applied by the Courts while determining the reasonableness and constitutionality of validating acts cannot be applied while determining the validity or otherwise of the impugned amended legislation. Secondly, in view of the amendment, even if it is assumed that the imported sugar is excluded from the purview of Entry 31-B of the fifth schedule and requires to be taxed either under second or the fourth schedule to the Act for the first time, the same could not have been done to affect the vested rights of a dealer and thereby impose a fresh tax burden. The learned Counsel very fairly submits that opportunity for the dealer for passing on the tax burden on the purchasers and retrospective effect of tax liability for a long period may not be determining factor, while considering the constitutionality or otherwise of tax provisions, but they are relevant while considering the question of reasonableness or otherwise of the taxing provision, since such legislation can be dubbed as confiscatory and unreasonable and therefore unconstitutional being opposed to Article 19(1)(g) of the Constitution. The learned Counsel would further submit that even assuming that it is competent for the legislature to legislate retrospectively while enacting a taxing statute, the reasonableness of the legislation is always open for consideration of the Courts and the legislation can always be invalidated on the ground of unreasonableness or arbitrariness. In aid of his submission, the learned Counsel had invited my attention to the observations made by the Apex Court and other High Courts. I will be making reference to those decisions a little later.
23. Per contra, Sri Anand, learned Government Advocate for respondents would submit that the intention of the department all along was only to exempt ‘sugar’ that is produced and manufactured in India on which excise duties are imposable and further to levy sales tax on imported sugar, since Additional duties of excise is not paid on the commodity and in order to give effect to its intention, the legislature has suitably amended provisions in second, fourth and fifth schedules to the Act. The learned Counsel would further submit that the judgment of the Apex Court in State Trading Corporation’s case would not assist the petitioner, since the language employed in Entry V of III schedule to the Kerala General Sales Tax Act is different from the language employed by the legislature in Entry 31-B of fifth schedule to Karnataka Sales Tax Act. The learned Counsel would submit that it was always the intention of the legislature to exempt ‘sugar’ which has suffered Additional duties under the Act and not the ‘sugar’ which does not suffer any excise duty. Alternatively, the learned Counsel would submit that even assuming that the decision of the Apex Court in State Trading Corporation is not distinguishable on facts, the retrospective amendment with a validation clause made is only to make good the deficiency in the language employed in Entry 31-B of the fifth schedule to the Act, otherwise the State is obliged to refund taxes that are collected for the periods 1.4.1992 and onwards, based on the entry that existed from 1.4.1992 and onwards. Therefore, the learned Counsel submits that the impugned provision is neither unreasonable nor unconstitutional.
24. Now, it is well settled that the legislative power to impose tax also includes within itself, the power to tax retrospectively. The power to legislate retrospectively embraces within its scope, the power to validate actions taken and laws which had been declared invalid by the Courts, provided the infirmities or vitiating factors pointed by the Courts removed or cured legally. Inability of the dealer to realise the sales tax from its customers during the period covered by retrospective operation of law is also not a relevant factor which affects the competence of the legislature to enact a law imposing sales tax retrospectively and lastly the test of the length of time covered by the retrospective operation of amended law cannot by itself, necessarily be a decisive test. The General principle underlying the legislative power is that, once the legislative power is conceded, the legislature may exercise power prospectively or retrospectively.
25. It is also settled that unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights it is deemed to be prospective only. If the decision maker is proceeding experimentally and seeks to change the pattern of tax structure, the policy should be and usually is prospective and if the decision maker is merely adjusting the legal rules to confirm with the established principles of levy of tax or if it is in the nature of ‘curative statute’, the policy should be and usually is retro active or retrospective. The reason for this thinking appears to be, a retro active legislation creates a new and unanticipated rule and retro active application of the rule would undermine the statutory policy and produce hardships of inequitable results. The thinking of the Courts seems to be ‘curative statutes’ normally retroactive and a fresh statutes are prospective. Thus where a statute simply codifies what the legislature beliefs the Courts have misinterpreted, it should be presumptive be applied retrospective, since prospective interpretation of such statute is unpragmatic. A statute can be retrospective, but not if it results in manifest injustice by unsettling normal practice without sufficient policy justification.
26. Now let me notice the case law on the point. To begin with the Apex Court in GARIKAPATHI VEERAYYA V. N. SUBBAIAH CHOWDARY, was pleased to observe as under:-
“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 a litigant at the time when the Act was passed.”
27. In SRI VIJAYALAKSHMI RICE MILLS V. STATE OF ANDHRA PRADESH, the Apex Court was pleased to observe:
“It is well recognised rule of interpretation that in the absence of express words or appropriate language from which retrospectivity may be inferred, a notification takes effect from the date it is issued and not from any prior date. The principle is also well settled that statutes should not be construed so as to create new disabilities or obligations or impose new duties in respect of transactions which were complete at the time the amending Act came into force.”
(Underlining by me)
28. In GOVIND DAS V. I.T. OFFICER, the Supreme Court has indicated as under:
“Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Ed.) and reiterated in several decisions of this Court as well as English Courts is that “AH statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective” and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.”
29. In PUNJAB TIN SUPPLY COMPANY V. CENTRAL GOVERNMENT, the Apex Court has observed as under:
“17. All laws which affect substantive rights generally operate prospectively and there is a presumption against their retrospective if they affect vested rights and obligations unless the legislative intent is clear and compulsive. Such retrospective effect may be given where there are express words giving retrospective effect or where the language used necessarily implies that such retrospective operation is intended. Hence the question whether a statutory provision has retrospective effect or not depends primarily on the language in which it is couched. If the language is clear and unambiguous effect it will have to be given to the provision in question in accordance with its tenor. If the language is not clear then the Court has to decide whether in the light of the surrounding circumstances retrospective effect should be given to it or not.”
30. In MITHILESH KUMAR V. PREM BEHARI KHARE, the Apex Court has stated as under
“We read in Maxwell that it is a fundamental rule of English Law that no statute shall be construed to have retrospective operation unless such a construction appears very clearly at the time of the Act, or arises by necessary and distinct implication. A retrospective operation is, therefore, not to be given to a statute so as to impair existing right or obligation, otherwise than as regards matter of procedure unless that effect cannot be avoided without doing violence to the language of the enactment. Before applying a statute retrospectively the Court has to be satisfied that the statute is in fact retrospective. The presumption against retrospective operation is strong in cases in which the statute, if operated retrospectively, would prejudicially affect vested rights or the illegality of the past transactions, or impair contracts, or impose new duty or attach new disability in respect of past transactions or consideration already passed. However, a statute is not properly called a retrospective statute because a part of the requisite for its action is drawn from a time antecedent to its passing. We must look at the general scope and purview of the statute and at the remedy sought to be applied, and consider what was the former State of Law and what the legislation contemplated. Every law that takes away or impairs rights vested agreeably to existing laws is retrospective, and is generally unjust and may be oppressive. But laws made justly and for the benefit of individuals and the community as a whole, as in this case, may relate to a time antecedent to their commencement. The presumption against retrospectivity may in such cases be rebuted by necessary implications from the language employed in the statute. In cannot be said to be an invariable rule that a statute could not be retrospective unless so expressed in the very terms of the section which had to be construed. The question is whether on a proper construction the legislature may be said to have so expressed its intention. Craies on Statute Law, 7th E.D. Writes that the general rule of taw that statutes are not operated retrospectively may be departed from (a) by express enactment and (b) by necessary implication from the language employed, and the author goes on to say:
“If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the Courts will give it such an operation. “Baron Parke”, said Lord Hatherley in Pardo v. Bingham, ((1969) LR 4 CH App 735) did not considered it an invariable rule that a statute could not be retrospective unless so expressed in the very terms of the section which had to be, construed, and said that the question in each case was whether the legislature had sufficiently expressed that intention. In fact, we must look to the general score and purview of the statute, and at the remedy sought to be applied, and consider what was the former state of the law, what it was that the legislature contemplated. ” But a
statute is not to be read retrospectively except of necessity …. In Main v. Stark ((1890) 15 AC 384) Lord Selborne said: ” Their Lordships, of course, do not say that there might not be something in the context of an Act of Parliament, or to be collected from its language, which might give towards prima facie prospective a larger operation, but they ought not to receive a larger operation unless you find some reason for giving it… In all cases it is desirable to ascertain the intention of the legislature.”
He went on : “Words not requiring a retrospect operation, so as to affect an existing statute prejudicially, ought not to be so construed”. But in Reynolds v. Att. Geni.for Nova Scatia (1896 AC 240) it was held that this rule did not extend to protect from the effect of a repeal a privilege which did not amount to an accrued right.” (Pp.392-393)”.
31. In R. RAJA GOPALA REDDY (DEAD) BY L.RS. V. PADMINI CHANDRASHEKHARAN, the Supreme Court was pleased to observe as under:
“…. that it is now well settled that where a statutory provision which is not expressly made retrospective by the legislature seeks to affect the vested rights and corresponding obligations of parties, such provisions cannot be said to have any retrospective effect by necessary implication.”
32. The legislative competence to amend the provisions of the Act is not doubted or debated at the time of hearing of the petitions. The grievance of the petitioner is only with regard to retrospective operation of the amended provision on the ground petitioner would be subjected to pay tax which was never contemplated or foreseen at the time when the sales of imported sugar were actually effected. The stand of the State Government in the statement of objections filed before the Court and also at the time of hearing of the petitions is that the impugned amended provision is in the nature of clarification and naturally it would have retrospective operation.
33. The first question that requires to be answered is whether the impugned legislation is in the nature of clarification or validating an earlier enactment which had been declared by a competent Court as invalid. To answer this precise issue, several correspondence which are available in the Government files and produced before this Court by learned Government Advocate requires to be seen and noted. The Minister for sugar by his letter dated 11.9.1997 requests the Hon’ble Chief Minister and Minister for Finance to bring in a legislation to facilitate the department to levy tax on imported sugar at 15% for the reasons mentioned in his letter. To collect the information regarding the quantity of sugar imported, the names of the persons who were permitted to import sugar, the Commissioner of Commercial Taxes addresses a letter dated 3.10.1997 to the Commissioner of Central Excise and Customs and in that categorically observes that the Government of India has permitted the import of sugar in large quantity and in that connection, it is proposed to examine the feasibility of levying sales tax on imported sugar under the provisions of Karnataka Sales Tax Act, since the imported sugar is not subjected to additional excise duty and by yet another letter dated 9th January 1998, addressed to Commissioner of Commercial Taxes, Government of Maharashtra, requests him to give him information with reference to a news item dated 12.12.1997, wherein the Government of Maharashtra was considering imposition of sales tax on imported sugar, so that the State of Karnataka may also be advised suitably. Further when the Commissioner of Commercial Taxes took the view that the imported sugar could be taxed under Section 5(3)(a) read with SI. No. 18A of part ‘S’ of second schedule, the Principal Secretary to the Government did not agree with his thinking and infact by his correspondence dated 30.6.2000 informs him that it is not permissible to levy sales tax on imported sugar. These aspects I have noticed only to suggest that at no point of time either the Government or the department had any doubt in their mind that the imported sugar would fall under Entry 31-B of the fifth schedule but were trying to bring the said commodity within the net of sales tax by making appropriate amendment in their Act. Therefore, the impugned legislation cannot be either construed as a validating enactment or curative statute or in the nature of clarification as there was no enactment or law prior to 1.4.2001, which was invalidated by any Court or imperfect or defective on account of mistakes committed by the legislature which the legislature intends to cure by the impugned legislation.
34. At this point, it would be relevant to notice the observations made by the Apex Court in KRISHNA MURTHY AND COMPANY V. STATE OF MADRAS AND ANR., 31 STC 190 .
“We may at the outset state that the legislature can pass a law and make its provisions retrospective, it would be relevant to consider the effect of the said retrospective operation of the law both in respect of the legislative competence of the legislature and the reasonableness of the restriction imposed by it. It would thus be open to a party affected by the provisions of an Act to contend that the retrospective operation of the Act so completely alters the character of the tax imposed by it as to take it outside the limits of the entry which gives the legislature competent to enact the law or it may be open to the party to contend in the alternative that the restrictions imposed by the Act are so unreasonable that they should be struck down on the ground that they contravene the fundamental rights granted under Article 19(1)(f) and (g) of the Constitution. At the same time, we have to bear in mind that the legislative power conferred on the appropriate legislatures to enact laws in respect of topics covered by the several entries in the three lists can be exercised both prospectively and retrospectively. Where the legislature can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law, it can also provide for the retrospective operation of the said provisions. The legislative power, in addition, includes the subsidiary or auxiliary power to validate laws which have been found to be invalid. In a law passed by a legislature is struck down by the Court as being invalid for one infirmity or another, it would be competent to the appropriate legislature to cure the said infirmity and pass a validating law so as to make the provisions of the said earlier law effective from the date when it was passed.”
35. In lohia machines’ limited v. Union of india, 152 ITR 308 the Apex Court was pleased to observe.
“Retrospective validation is permissible, if tax already imposed is declared invalid owing to defect in legislation and not permissible if retrospectivity has the effect of imposing a tax not already sought to be imposed but in effect fresh levy,”
36. By Karnataka Act No. 5 of 2001, Entry 31-B is amended specifying that ‘Sugar’ produced or manufactured alone would be exempt under the entry and thereby excluding ‘imported sugar’ from the exemption contemplated under Entry 31-B of the fifth schedule to the Act. The amended legislation could not have been questioned if the amendment was only prospective but the said amendment has been given retrospective effect to exclude ‘imported sugar’ from the inception of Entry 31-B itself in the statute and thereby to levy tax for the past period. The effect of such retrospective operation would definitely result in an unexpected and unforeseen liability in respect of transaction which when took place was not subject to any charge or liability under the Act and further could not have been contemplated when sale of imported sugar was actually affected. The implied imposition of tax made would be most unreasonable and arbitrary. When the retrospective enactment of taxing statute imposes an unreasonable burden, the Courts would be reluctant to protect its retrospectivity. 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.
37. In the result, the following:
ORDER I. Petitions are allowed. Rule made absolute. II. The impugned orders made under the Act for several assessments are set aside. III. Entry 31-B of the Fifth Schedule to Karnataka Sales Tax Act, as it stood prior to 1.4.2001 included 'imported sugar' also and the same was exempt from levy of tax under Karnataka Sales Tax Act. IV. Retrospectivity given to the words 'produced or manufactured in India' after the word sugar in Entry 31-B of fifth schedule is struck down as unconstitutional. V. In the facts and circumstances of the case, parties are directed to bear their own costs. Ordered accordingly.