Sales tax on imported sugar upheld prospectively, but retrospective taxing entry struck down as impermissible.

The State's power to levy sales tax on imported sugar was upheld because the constitutional and statutory scheme governing declared goods and goods of special importance was treated as operating in distinct fields, and the levy was found to remain within parliamentary restrictions; the classification between imported and indigenous sugar was not held to be hostile discrimination, and the Article 301 challenge failed. The retrospective insertion of the taxing entry was invalid, however, because a taxing provision creating liability could not operate retrospectively on the facts presented. The levy was therefore sustained prospectively within the prescribed limits, while retrospective operation was struck down.

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Issues: (i) whether the State could levy sales tax on imported sugar consistently with the constitutional and statutory restrictions governing declared goods and goods of special importance; (ii) whether the retrospective insertion of the taxing entry for imported sugar was valid in law.

Issue (i): whether the State could levy sales tax on imported sugar consistently with the constitutional and statutory restrictions governing declared goods and goods of special importance.

Analysis: The statutory scheme under Article 286(3) of the Constitution of India, the Central Sales Tax Act, 1956, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and the Customs Tariff Act, 1975 was construed as operating in distinct fields. The levy of additional duty under the central enactments did not extinguish the State's legislative competence to impose sales tax, though such competence remained subject to the restrictions placed by Parliament. The Court held that the tax on imported sugar could be imposed within the constitutional ceiling and that the classification between imported sugar and indigenous sugar did not amount to hostile discrimination. The challenge based on Article 301 also failed, as the levy did not directly and immediately impede free trade.

Conclusion: The State's power to levy sales tax on imported sugar was upheld, subject to the statutory and constitutional limitations.

Issue (ii): whether the retrospective insertion of the taxing entry for imported sugar was valid in law.

Analysis: The taxing entry was introduced retrospectively so as to fasten liability on imported sugar from an earlier date. The Court held that while the statute could impose tax within the permissible rate and field, retrospective operation in the present context was not sustainable. The relevant provision fixing the levy had to be made prospectively, and a retrospective levy of this nature was impermissible.

Conclusion: The retrospective operation of the impugned taxing entry was invalid and was struck down for the relevant period.

Final Conclusion: The writ petitions succeeded only to the extent that the retrospective levy was invalid, while the State's authority to tax imported sugar prospectively within the prescribed limits was affirmed.

Ratio Decidendi: A State may levy sales tax on declared goods or imported goods of special importance only within the constitutional restrictions prescribed by Parliament, and a fresh taxing entry creating liability cannot be given retrospective effect unless such power is clearly authorised.

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