Kenya Bureau of Standards (Kebs) officers and police on Thursday evening intercepted illegally repackaged smuggled sugar in Kapenguria, West Pokot County.
Two businessmen were arrested after they were found with the contraband sugar.
Officers raided several supermarkets and seized 11 bags of suspected fake sugar from Santon Supermarket.
Business at the supermarket, located on Lotodo Street in the centre of town, came to a standstill after it was closed for two hours as the officers locked themselves inside while they carried out their investigation.
They later took samples from the 50kg bags of sugar.
This comes amid a debate over the presence of smuggled sugar in the country.
Last week, the government suspended 27 employees over the release of condemned sugar, which was declared unfit for human consumption in 2018 and was meant for industrial ethanol, to the public.
Kebs managing director Bernard Njiraini was among top officials questioned over the sale of 20,000 bags of condemned sugar worth over Sh163 million.
Mr Njiraini and other senior managers were grilled by detectives from the Directorate of Criminal Investigations (DCI) following reports that the sugar was released to a trader who repackaged and sold it.
The unscrupulous sugar trade in Kenya has taken off amid high prices for the commodity due to an ongoing shortage, which has seen retail prices for a two-kilogram packet triple since January.
Thomas Lokere - a manager at Santon Supermarket in Kapenguria - said officials were claiming that the sugar, packaged in unwanted kaki papers, was from Uganda.
"In this government the hustler is the real hustler, our chief hustler said we pack in small quantities and my supermarket is near the open air market where Mama Mbogas are. They can afford to buy a quarter, half or kilo, yet sugar is sold in bags," he said.
He said he buys sugar from traders in Khetias and Cherangany.
"They took 650 kilos of sugar. I think they wanted something smaller, but they didn't come here. We have Tims, which records everything in KRA, which shows everything. I don't know if I am being targeted because I am close to Uganda or what," he said.
He blamed the government for not notifying traders of suspected smuggled goods.
"The sugar was approved by KEBS. We have cheques and invoices. We are now buying sugar at Sh10,500," he said.
He dismissed allegations that the sugar came from Uganda.
"I am a law-abiding citizen and I have cooperated. I closed the supermarket for security reasons. At the moment we have no sugar. I could have sold 500,000 shillings today and I pay taxes.
We need to be told what sugar to sell and what not to sell," said Mr Lokere.
West Pokot County Police Commander Peter Kattam confirmed that two people had been arrested in connection with the smuggled sugar.
"The confiscated sugar will be taken to the laboratory to determine if it contains chemicals," he said.
This comes as the government continues a nationwide crackdown on smuggled sugar, which has allegedly been smuggled into the country despite being marked by the authorities.