Imported sugar exemption under Karnataka sales tax could not be withdrawn retrospectively by inserting an India-origin restriction.

Imported sugar fell within Entry 31-B of the Fifth Schedule to the Karnataka Sales Tax Act, 1957 before the 2001 amendment because the entry incorporated the statutory description of sugar as written, without adding any limitation based on origin. The imported character of the goods did not justify reading in a restriction that was not present in the text then in force, so the pre-amendment exemption applied. The retrospective insertion of the words "produced or manufactured in India" was invalid because a taxing amendment cannot retrospectively create a new liability or withdraw an existing exemption unless legislative intent is clear and express. The retrospective exclusion of imported sugar was therefore unconstitutional.

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Issues: (i) Whether imported sugar was covered by Entry 31-B of the Fifth Schedule to the Karnataka Sales Tax Act, 1957 before the 2001 amendment and therefore exempt from sales tax; (ii) Whether the retrospective insertion of the words "produced or manufactured in India" into Entry 31-B was valid.

Issue (i): Whether imported sugar was covered by Entry 31-B of the Fifth Schedule to the Karnataka Sales Tax Act, 1957 before the 2001 amendment and therefore exempt from sales tax.

Analysis: The description of sugar in Entry 31-B had been taken from the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Once a taxing entry incorporates the statutory description of a commodity, the incorporated description must be read as it stands. The imported character of the goods does not justify reading a limitation into the entry when no such limitation existed in the text then in force. The earlier entry therefore covered sugar as described in the incorporated schedule, including imported sugar.

Conclusion: Imported sugar was included in Entry 31-B prior to the amendment and was exempt from levy of tax.

Issue (ii): Whether the retrospective insertion of the words "produced or manufactured in India" into Entry 31-B was valid.

Analysis: Retrospective taxation is permissible only when the legislative intention is clear and unambiguous and does not create a fresh liability by implication. The impugned amendment was not a curative or validating measure for a pre-existing defect; it sought to exclude imported sugar from exemption from inception and thereby impose a new tax burden on completed transactions. Such retrospective burden on vested rights was held to be unreasonable and constitutionally impermissible.

Conclusion: The retrospective operation of the amendment was unconstitutional and was struck down.

Final Conclusion: The petitions succeeded, the assessment-related orders were set aside, and the pre-amendment exemption of imported sugar under Entry 31-B was affirmed while the retrospective tax exclusion was invalidated.

Ratio Decidendi: A taxing amendment cannot retrospectively impose a new liability or withdraw an existing exemption by implication unless the legislative intent is clear and express; an incorporated taxing description must be construed as written.

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