TMI Blog2003 (5) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent forms is as under: "Sugar other than sugar candy, confectionery and the like." (Act No. 31 of 1958. April 1, 1958 to March 31, 1986). "Sugar including sugar candy but excluding confectionery and the like." (Act No. 9 of 1986. April 1, 1986 to March 31, 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 April 1, 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 India)" shall be and shall be deemed always to have been inserted. 6.. Sugar and sugar preparations find a place at serial No. 18A to Part "S" of the Second Schedule to the Act. Goods coming under this Schedule attract t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, the entries relating to the following commodities would be amended suitably. I ....................... II ...................... III. Sugar, textiles, tobacco and tobacco products when imported from outside the country. IV.................... 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 honourable 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 a 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 March 31, 1992. By Karnataka Act No. 4 of 1992, entry 31-B is amended and in that the Legislature has incorporated the description of "sugar" as provided in column 3 of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The Schedule to this Act describes several commodities; "sugar" is one of them. The intendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugar 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 105O 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 I of the Seventh Schedule to the Constitution wherein provision is made for the levy of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 wellrecognised 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. Inland Revenue Commissioners [1928] AC 217 at p. 228 (97 LJKB 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lature 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 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The learned counsel would further submit that the judgment of the apex Court in State Trading Corporation's case [1999] 114 STC 7, would not assist the petitioner, since the language employed in entry 5 of the Third Schedule to the Kerala General Sales Tax Act is different from the language employed by the Legislature in entry 31-B of the 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 [1999] 114 STC 7, 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 April 1, 1992 and onwards, based on the entry that existed from April 1, 1992 and onwards. Therefore, the learned counsel submits that the impugned provision is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubbiah Choudhry reported in AIR 1957 SC 540 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 litigation at the time when the Act was passed." 27.. In Sri Vijayalakshmi Rice Mills v. State of Andhra Pradesh reported in AIR 1976 SC 1471, the apex Court was pleased to observe: "It is a 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) Here italicised. 28.. In Govinddas v. Income-tax Officer reported in [1976] 103 ITR 123 (SC); AIR 1977 SC 552, the Supreme Court has indicated as under: "Now, it is a well-settled rule of interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istinct 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 requisites 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repeal a privilege which did not amount to an accrued right. (pp. 392-393)." 31.. In R.Rajagopal Reddy (dead) by L.Rs. v. Padmini Chandrasekharan reported in (1995) 2 SCC 630 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 vested rights and corresponding obligations of parties, such provision 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.. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 April 1, 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 Krishnamurthi and Co. v. State of Madras reported in [1973] 31 STC 190. "We may at the outset state that though 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 competence to enact the law or it may be open to the party to contend in the alternative that the restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onable 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 the 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 the Karnataka Sales Tax Act, as it stood prio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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