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TMI Blog2019 (7) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... t after its reorganisation/division. As a result of bifurcation some areas that were earlier part of the State of Madhya Pradesh would now form part of the new State of Chhattisgarh, albeit this would not matter and affect application of the laws as they applied prior to the appointed date to the territories that required a part of the reorganised State of Madhya Pradesh. The effect, thereof, is that the laws enacted by the State of Madhya Pradesh before the reorganisation would continue to apply to the areas forming part of the new State of Chhattisgarh and also the reorganised State of Madhya Pradesh, but within their territorial confines. The enactments or the laws in force in the unified State of Madhya Pradesh would continue to apply to the two states, not as one or the same enactment or law, but as two separate enactments or laws as applicable to two different states. Appeal allowed. - CIVIL APPEAL NO. 5302 OF 2019 (ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 23592 OF 2014) - - - Dated:- 9-7-2019 - CIVIL APPEAL NO. 460 OF 2005 CIVIL APPEAL NO. 461 OF 2005 CIVIL APPEAL NO. 7073 OF 2005 CIVIL APPEAL NO. 2343 OF 2007 CIVIL APPEAL NO. 5303 OF 2019 (ARISING OUT O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two states henceforth would be inter-state trade and not intra-state trade and the provisions of the Reorganisation Act had not removed and eclipsed this legal position but had a limited effect to treat the laws in operation in the State of Madhya Pradesh as equally applicable to the State of Chhattisgarh. 4. The other set of appeals arising from Special Leave Petition (Civil) Nos. 10520 of 2013, 1334, 10165, 23297 of 2014, 6729 and 16550 of 2016 have been preferred by the State of Madhya Pradesh and the State of Chhattisgarh impugning decisions of the High Court of Madhya Pradesh, which have in view of the pronouncement of this Court in Commissioner of Commercial Taxes, Ranchi and Another v. Swarn Rekha Cokes and Coals Pvt. Ltd. and Others (2004) 6 SCC 689 taken a contrary view and held that notwithstanding the creation of the two states, exemption or deferment of tax notifications issued before the bifurcation would continue to apply in the new state and that for the purpose of sales tax, the two states were deemed to be one because of the legal fiction envisaged vide Sections 78 and 79 of the Reorganisation Act. 5. At this stage, it would be appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore we dwell into the respective contentions and elaborate our reasons, it would be appropriate to reproduce relevant provisions of the Reorganisation Act, viz. Sections 2(e), (f), (j) and (k), Sections 3, 4 and 5 and Sections 78, 79, 80, 85 and 86(1) which are as under: Section 2 (e), (f), (j) and (k) of the Reorganisation Act Part I PRELIMINARY 2. Definitions. -In this Act, unless the context otherwise requires, - xx xx xx (e) existing State of Madhya Pradesh means the State of Madhya Pradesh as existing immediately before the appointed day; (f) law includes any enactment, ordinance, regulation, order, bye-law, rule, scheme, notification or other instrument having, immediately before the appointed day, the force of law in the whole or in any part of the existing State of Madhya Pradesh; xx xx xx (j) successor State , in relation to the existing State of Madhya Pradesh, means the State of Madhya Pradesh or Chhattisgarh; (k) transferred territory means the territory which on the appointed day is transferred from the existing State of Madhya Pradesh to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in relation to the State of Madhya Pradesh or Chhattisgarh of any law made before the appointed day, the appropriate Government may, before the expiration of two years from that day, by order, make such adaptations and modifications of the law, whether by way of repeal or amendment, as may be necessary or expedient, and thereupon every such law shall have effect subject to the adaptations and modifications so made until altered, repealed or amended by a competent legislature or other competent authority. Explanation. - In this Section, the expression appropriate Government means as respects any law relating to a matter enumerated in the Union List, the Central Government, and as respects any other law in its application to a State, the State Government. 80. Power to construe laws.- Notwithstanding that no provision or insufficient provision has been made under section 79 for the adaptation of a law made before the appointed day, any court, tribunal or authority, required or empowered to enforce such law may, for the purpose of facilitating its application in relation to the State of Madhya Pradesh or Chhattisgarh, construe the law in such manner, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. Section 5 of the Reorganisation Act states that on and from the appointed day, in the First Schedule to the Constitution under the heading THE STATES after entry 25, entry 26 shall be inserted by mentioning the State of Chhattisgarh which shall comprise of the territories specified in Section 3 of the Reorganisation Act. Similarly, in relation to and in the case of Madhya Pradesh, necessary changes will be made in the territories forming part of the State by excluding the territories specified in Section 3 of the Reorganisation Act. 11. Before interpreting Sections 78 and 79 of the Reorganisation Act which are in pari materia to Sections 84 and 85 of the Bihar Reorganisation Act, 2000, we would like to reproduce paragraphs 26, 27, 28, 29 and 30 of Swarn Rekha (supra), which read as under: 26. The question then arises, as to what is the true meaning and import of Sections 84 and 85 of the Act? 27. We have earlier reproduced Sections 84 and 85 of the Act. As earlier noticed, Sections 3 to 6 which form part of Part II of the Act provide for the formation of new States to be known as the State of Jharkhand and the State of Bihar. The territories s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetent authority. A conjoint reading of both these provisions makes it abundantly clear that the territorial references in any law in force immediately before the appointed day must be construed as meaning the territories within the existing State of Bihar before the appointed day. To facilitate their application in respect of the State of Bihar or Jharkhand, the appropriate Government may, before the expiration of two years from that day, by order, make such adaptations and modifications of the law as it may consider necessary or expedient by way of repeal or amendment. Till such law is so repealed or amended in accordance with law, it shall have effect. After their amendment or alteration, they shall have effect subject to the adaptations and modifications made. We, therefore, find no difficulty in holding that the notification of the Government of Bihar issued under Section 7(3)(b) of the Bihar Finance Act, 1981 and published in the gazette on 22-12-1995 being SO No. 478 is law as defined by Section 2(f) of the Act. The said notification holds the field and applies to all the territories which comprised the undivided State of Bihar. The States of Bihar and Jharkhand have been v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as merely an adjustment of territories by the reorganisation of a particular State, from a case of absorption of one State in another by accession, conquest, merger or integration. The same view was taken by this Court in the other two judgments referred to earlier. We are of the view that the principles laid down in Balbir Singh case fully apply to the facts of this case having regard to the identical legislative provision and, particularly so when the notification in question is by definition law and not a mere administrative order. 29. The next question which arises is whether the aforesaid notification has been altered or modified by the State of Jharkhand. It was sought to be argued before us that the State of Jharkhand has announced its own industrial policy on 25-8-2001 and, therefore, the industrial policy of 1995 and the notification bearing SO No. 478 dated 22-12-1995 issued under Section 7(3)(b) of the Act will have no legal force in the State of Jharkhand. The High Court in Swarn Rekha case has considered this aspect of the matter and we find ourselves in complete agreement with the view taken by the High Court. There is nothing in the industrial policy of 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gination to boggle when it comes to the inevitable corollaries of that state of affairs. Section 84 bids us to imagine that despite the division of the erstwhile State of Bihar into two States, any law in force immediately before the appointed day, notwithstanding territorial references in them, shall, until otherwise provided by the competent legislature or other competent authority, be construed as meaning the territories within the existing State of Bihar before the appointed day. In simple words, though the law may refer to the State of Bihar, and though the State of Bihar has been bifurcated into two by creating the State of Jharkhand, the laws in force before the appointed day must continue to operate in the territories which formed the erstwhile State of Bihar. This, of course, is subject to amendment, alteration or repudiation by a legislature or other competent authority. The statutory notification relied upon, therefore, continues to operate throughout the territories which earlier constituted the State of Bihar. Under Section 85, they shall continue to operate until repealed or amended in the manner provided. As a natural consequence, the entrepreneurs are entitled to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harkhand, but their counterparts in the State of Jharkhand would not be entitled to such benefit. We must not lose sight of the fact that an unforeseen event may give rise to unusual situations. Faced with such situations, the legislature has to find appropriate methods and solutions to deal with them. When the State of Bihar announced its industrial policy in the year 1995, it could not foresee that the State will be divided five years later. But when the division of the State became a reality, Parliament had to make appropriate provisions to carry on the administration in the two States. If the laws in force were to lapse on the day the division was effected, a chaotic situation would have emerged inasmuch as the newly created State would be rendered a State without laws. It is, therefore, that provisions like Sections 84 and 85 of the Act are enacted to maintain continuity, and at the same time authorise the States to make such modifications and adaptations as are considered necessary by mere issuance of orders within two years, and thereafter by legislation or exercise of power by the competent authority. Such provisions have necessarily to be incorporated in legislations relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the new State of Chhattisgarh in a manner, without affecting its substance, as would be necessary or proper in regard to the matter before the court, tribunal or authority. This prime objective must keep in mind by the Court while interpreting the provisions. Section 85 in the nature of a non-obstante or overriding clause mandates that the provisions of the Act would have effect notwithstanding anything inconsistent contained in any other law. Therefore, the exemption notification must be interpreted as in force in both the States i.e. the reorganised State of Madhya Pradesh and the new State of Chhattisgarh as if the unified State of Madhya Pradesh had not been bifurcated. This would be the only way to reconcile Part X of the Reorganisation Act and give effect to the legal fiction created by Sections 78 and 79 of the Reorganisation Act. Section 78 by incorporating a deeming fiction enures to the benefit given to the private parties/assessee was not denied and fully given effect to. 13. The two States, on the other hand, submit that with effect from the appointed day the new State of Chhattisgarh had come into existence and hence the trade inter-se or between the terr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the laws as they applied prior to the appointed date to the territories that required a part of the reorganised State of Madhya Pradesh. Section 78, no doubt uses the word deemed but in fact, the first part does not incorporate/create any deeming fiction and rather postulates and states the obvious. However, the second part of Section 78 incorporates a deeming fiction when it states that territorial references to such law in the State of Madhya Pradesh, i.e. the laws enacted by the legislature and executive of the State of Madhya Pradesh before bifurcation, shall until otherwise provided by the competent legislature or other competent authority be construed as meaning the territories within the existing state of Madhya Pradesh before the appointed day. The effect, thereof, is that the laws enacted by the State of Madhya Pradesh before the reorganisation would continue to apply to the areas forming part of the new State of Chhattisgarh and also the reorganised State of Madhya Pradesh, but within their territorial confines. The enactments or the laws in force in the unified State of Madhya Pradesh would continue to apply to the two states, not as one or the same enactment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. It states that notwithstanding that no provision or insufficient provision has been made in terms of Section 79, the court, tribunal or authority interpreting such laws made by the unified State of Madhya Pradesh would construe the law in such a manner as to facilitate its application to the successor States of Madhya Pradesh and Chhattisgarh without effecting the substance. In other words, the court, tribunal or authority while interpreting the laws would go by the substance and with the objective and purpose of facilitating the application of laws in relation to the successor States of Madhya Pradesh and Chhattisgarh, notwithstanding the fact that the legislature or the competent authority in relation to the laws applicable to the States of Madhya Pradesh and Chhattisgarh have not passed any law before or within the expiration period of two years from the appointed date. 18. Section 85 of the Reorganisation Act states that the provisions of the said enactment shall have effect notwithstanding anything inconsistent contained in any other law. Therefore, the provisions of the Reorganisation Act have been given primacy over any other law. However, this primacy is not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer or movement of goods from one state to another. Such transactions, notwithstanding that the situs of sale would necessarily be at a fixed location, are inter-state sale or trade and not intra-state sale or trade. Thus, when there is a movement of goods between the two states without there being a transfer of title to the consignor or consignee, compliance would have to be made with the relevant laws applicable to such inter-state transactions. This position will hold good and equally apply in respect of the inter-state sales between the new State of Chhattisgarh and the reorganised State of Madhya Pradesh and vice-versa. The movement of goods from one state to another is in the nature of inter-state sales. The fact that two separate states are formed after the bifurcation, which were once a single entity for the purpose of levying sales tax, would be of no consequence so as to disturb the legal and constitutional impact by which two separate States were created and the legal effect of Article 286 as regards the inter-state character of inter-state transactions. 19. Section 86 of the Reorganisation Act states that in case any difficulty arises in giving effect to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are considered necessary by mere issuance of orders within two years, and thereafter by legislation. This decision had referred to several earlier enactments by the Parliament under Article 3 beginning with the States Reorganisation Act, 1956 till the Bihar Reorganisation Act, 2000 which had similar provisions under the heading Territorial extent of laws and Power to adapt laws as in the present case. Referring to Section 84 of the Bihar Reorganisation Act, 2000, which is identically worded as Section 78 of the Reorganisation Act, this Court in Ranjan Sinha (supra) held as under: 29. Section 84 contains two legal fictions, first is that the reorganisation of Bihar would not affect the applicability of laws made by the State of Bihar to all territories included in it before reorganisation and after the reorganisation. In other words, a law made by Bihar shall be applicable to all the territories of the erstwhile State of Bihar including the territories of the State of Jharkhand even after reorganisation. The second fiction is that until Jharkhand provides for it by way of amendment or otherwise, territorial reference in any law to the State of Bihar shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined and rejected several contentions of the dealers carrying on business in the city of Madras for restraining the State of Andhra from imposing sales tax on sales effected in favour of merchants carrying on business in the State of Andhra. One of the contentions raised related to the true interpretation of Section 53 of the Andhra State Act, 1953, the argument being that though for political purposes the State of Andhra was a separate State, but for enforcement of laws as they stood on the date of division/bifurcation, the State of Andhra was deemed to be a part of the State of Madras. This contention was rejected holding that the States of Andhra and Madras were two separate States and were governed by two separate though identical Acts. Accordingly, when the sales tax enactment as applicable had provided for single levy on successive sales of yarn, it would have application to sales in the State of Madras or Andhra, as the case may be, and not in the other State or inter-state sales. Section 53 had provided that the laws in existence in the territories which were constituted and had become part of the State of Andhra would continue to be governed by the laws which were ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d would, from the appointed date i.e. 1st October, 1953, cease to be the territories of the State of Madras and would be the territories of the new State of Andhra. Further, the laws in force in the territories in the State of Andhra prior to its constitution shall continue to remain in force even after its creation. Accordingly, one of the Acts namely the Madras General Sales Tax Act, 1939, would continue to apply to the new State of Andhra and the word Madras used in said Act would be replaced/substituted by the word Andhra . To this extent, Section 53 of the Andhra State Act which is pari materia to Section 78 of the Reorganisation Act, 2000, declares that notwithstanding the emergence of the State of Andhra, there shall be no change in the laws in force. This provision was made for avoiding any hiatus and the same set of laws, therefore, would continue to be operative in the States of Madras and Andhra. 23. We have quoted the relevant portions of the judgment in the case of Swarn Rekha Cokes and Coals Pvt. Ltd. (supra) and have no difficulty in agreeing to the dictum as enunciated in paragraphs 26, 27 and 28, but find it difficult to agree with the ratio recorded i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... errule the contrary observations and ratio recorded in paragraphs 29 and 30 in Swarn Rekha Cokes and Coals Pvt. Ltd. (supra) in light of the legal position elucidated and explained above. 25. In the end, we must take note of one of the submissions made by the private parties/assessee that under the exemption clauses even the inter-state transactions were entitled to some benefits. This contention was not raised in the writ petition or even in the pleadings before us and has been urged and argued for the first time. We would not like to comment and decide this contention in vacuum and leave it open to the private parties/assessee to raise this plea before the authorities in appropriate proceedings under the statute. In other words, the authorities would examine whether the inter-state transactions were entitled to any benefit and if so, whether the private parties/assessee herein fulfil and meet the requirements to claim such benefit. We have not expressed any opinion either way on this contention. It was pointed out that in several cases adjudication orders may have been passed and the private parties/assessee may not have preferred appeals in view of the writ petitions f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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