REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5302 OF 2019

(ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 23592 OF 2014)

THE STATE OF MADHYA PRADESH

AND OTHERS

….. APPELLANT(S)

VERSUS

LAFARGE DEALERS ASSOCIATION

AND OTHERS ….. RESPONDENT(S)

W I T H

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 OF SPECIAL LEAVE PETITION (CIVIL) NO.10520 OF 2013)

CIVIL APPEAL NO. 5304 OF 2019

(ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 1334 OF 2014)

CIVIL APPEAL NO. 5305 OF 2019

(ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 10165 OF 2014)

CIVIL APPEAL NO. 5306 OF 2019

(ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 23297 OF 2014)

CIVIL APPEAL NO. 5308 OF 2019

(ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 6729 OF 2016)

A N D

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 1 of 38

CIVIL APPEAL NO. 5307 OF 2019

(ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 16550 OF 2016)

J U D G M E N T

SANJIV KHANNA, J.

Leave granted in all the special leave petitions.

2.This judgment would dispose of the afore-captioned appeals

which relate to the legal effect of bifurcation of the State of

Madhya Pradesh into the successor State of Madhya Pradesh and

the State of Chhattisgarh by the Madhya Pradesh Reorganisation

Act, 2000 (“Reorganisation Act”, for short) on exemption or benefit

of deferment of sales tax granted under the Madhya Pradesh

Commercial Tax Act, 1994 read with the applicable rules. The

question to be answered is whether the industrial unit in the

reorganised State of Madhya Pradesh and under the new State of

Chhattisgarh would continue to avail the benefit of such exemption

or deferment even after the bifurcation in both the states,

irrespective of the location of the industrial unit which would be in

one of the two states.

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 2 of 38

3.Civil Appeal Nos. 460, 461, 7073 of 2005 and 2343 of 2007 arise

from the judgments of the Division Bench of the Madhya Pradesh

High Court, Jabalpur Bench, upholding judgment of the learned

Single Judge dismissing the Writ Petition by the

manufacturer/dealer of cement inter-alia recording that on

enforcement of the Reorganisation Act, two separate states viz.,

the State of Madhya Pradesh and the State of Chhattisgarh had

come into existence as postulated by the Constitution of India and

hence, benefit of the exemption or deferment of sales tax would

be restricted and confined to the boundaries/limits of the state in

which the unit was located and would not operate beyond the

limits of the state boundary. It was observed that any trade and

movement of goods between 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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 3 of 38

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

1

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 to mention that a Division

Bench of this Court (Ashok Bhan and V.S. Sirpurkar, JJ.) vide

order dated 12

th

September, 2007 had observed that certain facts

and provisions of law which were not taken note of in Swarn

Rekha’s case (supra), had come to light and therefore they had

thought it appropriate to refer the appeals to a larger Bench for

consideration.

6.Before we deal with the rival contentions, it would be appropriate

to notice and take on record the undisputed position. State of

1

(2004) 6 SCC 689

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 4 of 38

Madhya Pradesh in exercise of powers conferred under Section

12 of the Madhya Pradesh General Sales Tax Act, 1958 and

Section 8(5) of the Central Sales Tax Act, 1956 (for convenience

we would refer to the two enactments as the “Sales Tax Act” for

short), with a view to attract investors and increase industrial

output in the State, had vide notification dated 19

th

February, 1991

formulated a policy for grant of sales tax exemption to industrial

units having fixed assets above Rs. 100 crores. Quantum of

exemption from tax was to be equal to the capital investment in

the fixed assets and the duration or period was 11 years from the

date of commencement of commercial production or the date on

which quantum of exempted tax reached the limit equivalent to the

value of capital investment in the fixed assets. It is an undisputed

position that private parties/assessee to the present appeals being

entitled to the benefit/exemption were issued a certificate of

eligibility for exemption from tax by the Directorate of Industries in

the unified State of Madhya Pradesh.

7.The industrial units belonging to the private parties/assessee

situated in the unified State of Madhya Pradesh after the

bifurcation in terms of the Reorganisation Act would necessarily

fall in the area/boundary forming a part either of the reorganised

State of Madhya Pradesh or the new State of Chhattisgarh. As

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 5 of 38

noticed above, the precise issue before us is whether these

industrial units, which were granted exemption and were after the

bifurcation located in the reorganised State of Madhya Pradesh or

the new State of Chhattisgarh, would continue to enjoy the benefit

of exemption/deferment of tax in the other state while conducting

inter-state transaction(s) from the state they are located to the

new State of Chhattisgarh or the reorganised State of Madhya

Pradesh, as the case may be.

8.Before 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:

“S ection 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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 6 of 38

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 State of Chhattisgarh;

Sections 3, 4 and 5 of the Reorganisation Act

Part II

REORGANISATION OF THE STATE OF MADHYA

PRADESH

3. Formation of Chhattisgarh State.— On and from

the appointed day, there shall be formed a new State to

be known as the State of Chhattisgarh comprising the

following territories of the existing State of Madhya

Pradesh, namely:—

Bastar, Bilaspur, Dantewada, Dhamtari, Durg, Janjgir-

Champa, Jashpur, Kanker, Kawardha, Korba, Koriya,

Mahasamund, Raigarh, Raipur, Rajnandgaon and

Surguja districts,

and thereupon the said territories shall cease to form

part of the existing State of Madhya Pradesh.

4. State of Madhya Pradesh and territorial divisions

thereof.— On and from the appointed day, the State of

Madhya Pradesh shall comprise the territories of the

existing State of Madhya Pradesh other than those

specified in section 3.

5. Amendment of the First Schedule to the

Constitution.— On and from the appointed day, in the

First Schedule to the Constitution, under the heading “I.

THE STATES”, —

(a) in the paragraph relating to the territories of the

State of Madhya Pradesh, after the words, brackets

and figures, “the Rajasthan and Madhya Pradesh

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(Transfer of Territories) Act, 1959 (47 of 1959)”, the

following shall be added, namely: —

“but excluding the territories specified in section 3 of

the Madhya Pradesh Reorganisation Act, 2000.”;

(b) after entry 25, the following entry shall be inserted,

namely: —

“26. Chhattisgarh: The territories specified in section 3

of the Madhya Pradesh Reorganisation Act, 2000.”

Sections 78, 79, 80, 85 & 86 of the Reorganisation

Act

PART X

LEGAL AND MISCALLANEOUS PROVISIONS

78. Territorial extent of laws.— The provisions of Part

II of this Act shall not be deemed to have effected any

change in the territories to which any law in force

immediately before the appointed day extends or

applies, and territorial references in any such law to the

State of Madhya Pradesh shall, until otherwise

provided by a competent Legislature or other

competent authority be construed as meaning the

territories within the existing State of Madhya Pradesh

before the appointed day.

79. Power to adapt laws.— For the purpose of

facilitating the application 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.

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 8 of 38

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, without

affecting the substance, as may be necessary or

proper in regard to the matter before the court, tribunal

or authority.

85. Effect of provisions of the Act inconsistent with

other laws.— The provision of this Act shall have

effect notwithstanding anything in consistent therewith

contained in any other law.

86. Power to remove difficulties.— (1) If any difficulty

arises in giving effect to the provisions of this Act, the

President may, by order, do anything not in consistent

with such provisions which appears to him to be

necessary or expedient for the purpose of removing the

difficulty:

Provided that no such order shall be made after the

expiry of a period of three years from the appointed

day.”

9.The Reorganisation Act, which was to commence from the

appointed day, was notified by the Central Government vide

Notification No. S.O. 827(E), dated 14

th

September, 2000

published in the Gazette of India, Extraordinary Part II sec.3(ii)

with 1

st

November, 2000 as the appointed date. Accordingly, on 1

st

November, 2000 the erstwhile State of Madhya Pradesh was

bifurcated and divided into the reorganised State of Madhya

Pradesh and the new State of Chhattisgarh. The political map of

the country underwent a change. The reorganised State of

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 9 of 38

Madhya Pradesh and the new State of Chhattisgarh were

described as “successor State” vide clause (j) to Section 2 of the

Reorganisation Act. The transferred territories, which were to form

part of the State of Chhattisgarh, were demarcated and specified

in Section 3 of the Reorganisation Act. As per Section 4, the

reorganised State of Madhya Pradesh was to comprise of the

existing territories other than those specified in Section 3 i.e., the

territories which shall now form part of the State of Chhattisgarh.

The expression “law” as defined in clause (f) to Section 2 of the

Reorganisation Act included any enactment, ordinance, regulation,

order, notification, etc., in force immediately before the appointed

day in the whole or any part of the erstwhile or unified State of

Madhya Pradesh. The law by definition would include delegated

legislation and also the exemption notification issued under the

Sales Tax Act, and the certificate of eligibility for exemption from

tax issued under the Sales Tax Act.

10.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.

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 10 of

38

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 specified in Section 3

constitute the new State of Jharkhand and the

remaining territories fall within the territory of the State

of Bihar. However, Section 84 in express terms,

provides that the provisions of Part II shall not be

deemed to have effected any change in the territories

to which any law in force immediately before the

appointed day extended or applied and the territorial

references in any such law to the State of Bihar shall,

until otherwise provided by a competent legislature or

other competent authority, be construed as meaning

the territories within the existing State of Bihar before

the appointed day. Section 85 provides that for the

purpose of facilitating the application in relation to the

State of Bihar or Jharkhand 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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 11 of

38

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. The language in these sections is

clear and unambiguous. These sections provide that

the laws which were applicable to the undivided State

of Bihar would continue to apply to the new States

created by the Act. The laws that operated continue to

operate notwithstanding the bifurcation of the erstwhile

State of Bihar and creation of the new State of

Jharkhand. They continue in force until and unless

altered, repealed or amended. It is not disputed before

us and indeed it cannot be disputed in view of the wide

definition given to “law” in Section 2(f) of the Act that

the notification issued under Section 7(3)(b) of the

Bihar Finance Act, 1981 is law within the meaning of

Sections 84 and 85 of the Act. Thus, the notification

published in the Bihar Gazette on 22-12-1995 bearing

SO No. 478 continues to operate in the State of

Jharkhand till such time as it is altered, repealed or

amended. By virtue of Section 84, the territorial

references in any such law (which includes the

notification in question), to the State of Bihar shall be

construed as meaning the territories within the existing

State of Bihar before the appointed day, until otherwise

provided by a competent legislature or other competent

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.

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 12 of

38

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

vested with power to make such adaptations and

modifications of the law as they may consider

necessary or expedient. This they can do by issuance

of order before the expiration of two years from the

appointed day. After the adaptations and modifications

of the law, the law shall have effect as so modified or

adapted till such time as a competent legislature or

other competent authority further alters, repeals or

amends such law.

28. This is not the first time that a provision such as

Section 84 of the Act has come up for interpretation by

this Court. Section 88 of the Punjab Reorganisation

Act, 1966 is also identically worded as Section 84 of

the Act. That provision came up for consideration

before this Court in at least three decisions which have

been brought to our notice, namely, State of Punjab v.

Balbir Singh, Sher Singh v. Financial Commr. of

Planning and Dhayanand v. Union of India. In the first

of these cases i.e. in State of Punjab v. Balbir Singh

this Court was concerned with an administrative order

and not a law with which we are concerned in the

instant case. Section 88 of the Punjab Reorganisation

Act was noticed as also the definition of law under

Section 2(g) of that Act. Section 2(g) of that Act did not

define law as widely as it has been defined under

Section 2(f) of the Act. This Court agreed with the High

Court that the impugned administrative orders in

question were not law within the meaning of Section

2(g) of that Act and hence, were not saved by Section

88. However, this Court held that when there is no

change of sovereignty and it is merely an adjustment of

territories by reorganisation of a particular State, the

administrative orders made by the Government of the

erstwhile State continue to be in force and effective

and binding on the successor States until and unless

they are modified, changed or repudiated by the

Governments of the successor States. This Court

observed that no other view is possible to be taken as

that will merely bring about chaos in the administration

of the new States. Their Lordships found no principle in

support of the stand that administrative orders made by

the Government of the erstwhile State automatically

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 13 of

38

lapsed and were rendered ineffective on the coming

into existence of the new successor States. Their

Lordships further distinguished a case where there was

no change of sovereignty and there was 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 2001 which alters, amends or repudiates the

notification dated 22-12-1995. It deals with new

industrial units set up after 15-11-2000 and, therefore,

whatever benefits or incentives are provided for in the

said policy are applicable to new industrial units set up

after 15-11-2000. In the instant case, we are

concerned with industrial units set up before 15-11-

2000 and which were found eligible for grant of

exemption certificate under the industrial policy of the

State of Bihar of the year 1995. Moreover, the industrial

policy of the State of Jharkhand will not apply to the

units already existing before that date. In these

circumstances in the absence of anything in the

Industrial Policy, 2001 of the Government of Jharkhand

or in the notification or order issued by the Government

of Jharkhand, Notification No. SO No. 478 dated 22-

12-1995 must continue to operate in the State of

Jharkhand and the appellants or respondents

concerned, as the case may be, must be held entitled

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 14 of

38

to the benefits and incentives envisaged by the said

notification.

The submission which found favour with the High

Court of Jharkhand at Ranchi in Civil Appeal No. 3765

of 2003 is that the statutory notification issued by the

erstwhile State of Bihar envisaged only intra-State sale

transactions and not inter-State sale transactions. With

the coming into existence of two States, incentive by

way of exemption from payment of sales tax cannot be

claimed in respect of transactions which can now be

categorised as inter-State sale transactions. The

submission overlooks the provisions of Sections 84

and 85 of the Act, which create a legal fiction. It is well

settled that in interpreting a provision creating a legal

fiction, the court must ascertain the purpose for which

the fiction is created and having done so, to assume all

those facts and consequences which are incidental or

inevitable corollaries to the giving effect to the fiction.

When the law requires that an imaginary state of affairs

should be treated as real, then unless prohibited from

doing so, one must also imagine as real the

consequences and incidents which, if the putative state

of affairs had in fact existed, must inevitably have

flowed from or accompanied it. As Lord Asquith in East

End Dwellings Co. Ltd. v. Finsbury Borough Council,

All ER at p. 589 observed that having done so, you

must not cause or permit your imagination 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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 15 of

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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

the benefits and incentives provided in the said

notification. Having regard to the overriding provisions

of this Act, as envisaged under Section 91, the

statutory notifications must prevail and the benefits

flowing therefrom must accrue to the beneficiaries. We

must not permit our mind to boggle by imagining that

what was one State earlier has now become two and

consequently what were intra-State sale transactions

earlier are now inter-State sale transactions. If any law

in force before the appointed day must have effect in

the absence of its modification or repeal, the benefit

under that law must flow notwithstanding the fact that

in reality intra-State sale transactions may have

become inter-State sale transactions. Law gives

authority to the State concerned to bring about a

change in the state of affairs, if it so considers

necessary or expedient by modifying or amending the

law or by altering, repealing or amending it by

legislation. We have, therefore, no doubt that the High

Court of Jharkhand at Ranchi was wrong in dismissing

the writ petition on the ground that the notification of

22-12-1995 could not apply to inter-State sale

transactions.

30. We have carefully considered the decisions relied

upon by Shri Rakesh Dwivedi in Rattan Lal & Co. v.

Assessing Authority, State of Mysore v. P.B. Hussain

Kunhi & Co. and CST v. Minerva Minerals and we find

that none of those decisions in any manner advances

the case of the State. The decisions in those cases

depended on the interpretation of the provisions of the

Acts concerned which were not at all similar to the

provisions with which we are concerned in the instant

appeals. In Civil Appeal No. 2450 of 2003, the High

Court of Patna on a similar ground has rejected the

claim of the appellants. It noticed the earlier decision of

the High Court, but distinguished the same on the

ground that in the case in hand, the industrial unit was

situated in the State of Jharkhand while the benefit was

being claimed in the State of Bihar. In view of our

earlier findings, this would not be a relevant

consideration for rejecting the writ petition. Moreover, if

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 16 of

38

this principle were to be upheld, it would result in

arbitrary results inasmuch as the entrepreneurs whose

industrial units operate in the State of Bihar will get the

benefit of exemption from payment of sales tax on

purchase of raw materials in the State of Jharkhand,

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 relating to reorganisation of

States. It is, therefore, appropriate that such

legislations must be construed in the light of the

unusual situation created by the creation of a new

State and the object sought to be achieved.”

12.Relying upon the aforesaid ratio and interpretation of Sections 78

to 80, 85 and 86 of the Reorganisation Act, learned counsel for the

private parties/assessee have submitted that the Reorganisation

Act did not withdraw and negate the benefit of exemption which

was already granted in respect of the entire area forming part of

unified State of Madhya Pradesh. Provisions of the Reorganisation

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 17 of

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Act protect and enforce the “law” which included the exemption

notification in force in the unified State of Madhya Pradesh on the

appointed day. Reliance was placed on the Adaptation of Laws

Order, 2000 Notification No. F1/17/-2000/C.Tax/V dated 30

th

November, 2002 with effect from 1

st

November, 2000, the relevant

portion of which reads as under:

“2. The laws, as amended from time to time, specified

in the Schedule to this order, which are in force in the

State of Madhya Pradesh immediately before the

formation of the State of Chhattisgarh, are hereby

extended to and shall be in force in the State of

Chhattisgarh until repealed or amended. Subject to the

modifications that in all the laws for the words “Madhya

Pradesh” wherever they occur the word “Chhattisgarh”

shall be substituted.

3. Anything done or any action taken (including any

appointment, notification, notice, order, rule, form,

regulation, certificate or licence) in exercise of the

powers conferred by order under the laws specified in

the Schedule shall continue to be in force in the State

of Chhattisgarh.”

The Schedule to the said Notification, it was highlighted,

included the Sales Tax Act and the rules framed thereunder.

Accordingly, the Adaptation of Laws Order states that subject to

the modification in the form of substitution of the word “Madhya

Pradesh” with the word “Chhattisgarh”, “the law” would continue to

apply and had remained in force and would be effective for the

balance period of 11 years or till the quantum of exemption was

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 18 of

38

reached. Further, Section 80 of the Reorganisation Act empowers

the court, tribunal or authority to enforce “the law” for the purpose

of facilitating its application to the reorganised State of Madhya

Pradesh 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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 19 of

38

existence and hence the trade inter-se or between the territories

now forming part of the State of Chhattisgarh and the reorganised

State of Madhya Pradesh would be in the nature of inter-state

sales and not intra-state sales. The Sales Tax Act as earlier

applicable to the unified State of Madhya Pradesh would be

applicable in the reorganised State of Madhya Pradesh and the

new State of Chhattisgarh but within the territorial confines and

limits of the two States. Therefore, the units situated within the

territorial limits/boundaries of the reorganised State of Madhya

Pradesh and the new State of Chhattisgarh would continue to

enjoy benefit of exemption in respect of intra-state trade within the

particular state and not in respect of inter-state trade between the

two states. This is the exact purport and meaning behind Section

78 and 79 of the Reorganisation Act. Reliance was placed on the

judgment of the Division Bench of the Andhra Pradesh High Court

in Sri Peera Mohammad Mahamood Saheb v. The State of

Andhra Pradesh

2

, which we would advert to at the appropriate

stage.

14.Having considered the contention of the parties and in the context

of Sections 78, 79, 80, 85 and 86 of the Reorganisation Act, we

feel that the stand taken by the State of Madhya Pradesh and the

2

1960 (11) STC 456

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 20 of

38

State of Chhattisgarh is correct and merits acceptance. We have

already reproduced the aforesaid provisions and partly interpreted

them in paragraphs 9 and 10 and would now proceed to interpret

Sections 78 and 79 of the Reorganisation Act. Section 78 of the

Reorganisation Act consist of two parts. The first part states that

the provisions of the Reorganisation Act shall not be deemed to

have affected any change in the territories to which any law in

force immediately before the appointed date extends or applies. In

other words, the law in force before the appointed date, which in

the present case is 1

st

November, 2000, would continue to apply to

the successor or reorganised State of Madhya Pradesh as it

existed before bifurcation. This is natural and normal as the laws

enacted by the legislature and the executive of the State of

Madhya Pradesh would obviously apply to the territories forming

part of it 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. 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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 21 of

38

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 or law, but as two separate enactments or

laws as applicable to two different states.

15. The deeming fiction incorporated for the purpose of second

part of Section 78 does not postulate and state that the territories

which were earlier part of the State of Madhya Pradesh but now

form part of the State of Chhattisgarh would continue to remain

part of the reorganised State of Madhya Pradesh or should be

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 22 of

38

treated as part and parcel of the other state. This is not what is

postulated in Section 78. Deeming fiction in terms of Section 78

does not extend and include any such stipulation, either expressly

or by necessary implication. Indeed, this is not even remotely

visualised. This Court in B. S. Goraya vs. U.T. of Chandigarh

3

, in

paragraphs 6 to 8 had observed that a deeming provision is

operative for the purposes for which it is created and the Court

should be careful not to extend this fiction beyond the legitimate

field and the purposes for which the legislature had adopted the

fiction. The purpose and objective for creating fiction must be kept

in mind. In the present enactment, the object and purpose of the

deeming provision envisaged in Section 78 of the Reorganisation

Act is limited and restricted to the enforcement of enactment/laws

as they existed in the unified State of Madhya Pradesh to the new

State of Chhattisgarh, and nothing more and beyond.

16.Section 79 of the Reorganisation Act states that the appropriate

Government of the reorganised State of Madhya Pradesh and the

new State of Chhattisgarh may, before the expiration of two years

from the appointed date, by an order, as may be necessary or

expedient, make such adaptations or modifications in the earlier

laws enacted in the unified State of Madhya Pradesh by way of

3

(2007) 6 SCC 397

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 23 of

38

repeal or amendment. Thereupon, every law shall have effect

subject to the adaptations or modifications made, until further

repealed, modified or amended by the competent legislature or

other competent authority. Explanation to the said section states

that ‘appropriate Government’ in respect of any law means the

Central Government in respect of matters enumerated in the

Union List and in respect of any law in its application to a state,

the State Government.

17.Section 80 relates to the construction or interpretation of the laws

made by the State of Madhya Pradesh before the appointed date.

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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 24 of

38

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 meant to denude and over-ride

the legal effect envisaged by the Constitution consequent to the

creation of the successor State of Madhya Pradesh and the State

of Chhattisgarh which would henceforth have separate

government(s) comprising of different legislature and executive.

On and from the appointed date of 1

st

November,2000 any trade

between the State of Chhattisgarh and the State of Madhya

Pradesh and vice-versa would be inter-state trade and not intra-

state trade. The deeming fiction and the provisions of the

Reorganisation Act nowhere postulate that the trade would

continue to remain intra-state trade and not inter-state trade

between the two States. In fact, any deeming fiction to the said

effect would have fallen afoul and would be contrary to Article 286,

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 25 of

38

as it stood before amendment on 16

th

September, 2016 and reads

as under:

“286. Restrictions as to imposition of tax on the

sale or purchase of goods: -

No law of a State shall impose, or authorise the

imposition of, a tax on the sale or purchase of goods

where such sale or purchase takes place

(a) outside the State; or

(b) in the course of the import of the goods into, or

export of the goods out of, the territory of India.

(2) Parliament may by law formulate principles for

determining when a sale or purchase of goods takes

place in any of the ways mentioned in clause (1).

(3) Any law of a State shall, in so far as it imposes, or

authorises the imposition of,

(a) a tax on the sale or purchase of goods declared by

Parliament by law to be of special importance in inter-

State trade or commerce; or

(b) a tax on the sale or purchase of goods, being a tax

of the nature referred to in sub-clause (b), sub-clause

(c) or sub-clause (d) of clause (29-A) of Article 366,

be subject to such restrictions and conditions in regard

to the system of levy, rates and other incidents of the

tax as Parliament may by law specify.”

As per the said Article, states are not competent to enact

any legislation relating to the taxation of ‘inter-state sales’, an

expression which, in the context of the Constitution, has been

subject matter of several decisions explaining the difference

between ‘intra-state’ and ‘inter-state’ sales. The expression ‘inter-

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 26 of

38

state’ trade has specific legal connotation and meaning. It refers to

transfer 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 provisions of the said Act, the

President may, by an order, do anything as may be necessary and

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 27 of

38

expedient for removing the difficulties. However, such order

cannot be inconsistent with the provisions of the Reorganisation

Act. Proviso states that no order shall be made after the expiry of

three years from the appointed date.

20.In Ranjan Sinha and Another v. Ajay Kumar Vishwakarma and

Others

4

, three Judges’ Bench of this Court have elucidated that

the Parliament, under Article 3 of the Constitution, is empowered

to form a new State by separation of territory from any State or by

uniting two or more States. Article 4 of the Constitution states that

the law made by the Parliament with reference to Article 3 may

contain supplemental, consequential and incidental provisions.

When the territory of the existing State is reorganised by the

Parliament under Article 3, there is no change of sovereignty and it

is only a case of adjustment of territories as some portion of the

territories forming part of the existing state would now form part of

the newly formed state or get merged in a new state. In the latter

case, the laws which were applicable to the territories of the

reorganised state would continue to apply to the territories of the

new state until the newly created state adapts or subject to its

4

(2017) 14 SCC 774

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 28 of

38

competency amends or repeals the existing and applicable laws.

It was held:

“36. At the cost of repetition, we may mention that

under Article 3 of the Constitution, Parliament can alter,

amend, amalgamate, form new States, diminish or

increase area of a State. The principle of “clean slate”

as applicable in international law is not applicable when

reorganisation takes place under Article 3 of the

Constitution. The reorganised States do not usually

start as tabula rasa, rather they are successors of a

pre-existing erstwhile States. Under BROA, Jharkhand

was carved out of Bihar and the other separate States

came into existence on 15-11-2000. If the laws in force

were to lapse on the date the division was effected, a

chaotic situation would have emerged inasmuch as the

newly created State would be rendered a State without

laws. To avoid such situation, provisions like Sections

84 and 85 of BROA have been enacted to maintain

continuity, and at the same time authorising the States

to make such modifications and adaptations as 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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 29 of

38

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 mean all the

territories in Bihar before reorganisation. For instance,

if Bihar had made a law as applicable to entire Bihar, it

shall apply to Bihar and Jharkhand until it is amended

by the new State. The territories to which the said Act

is made applicable would also include the territories

which were included in Jharkhand. Section 85 is an

enabling provision which empowers both the States to

make adaptations and modification of the law by way of

amendment to the law as applicable to the newly

formed State.”

While interpreting Section 84 and 85 of the Bihar

Reorganisation Act, 2000 analogous to Section 78 and 79 of the

Reorganisation Act, this Court in Ranjan Sinha (supra) had dealt

with and affirmed the underlined theory of continuity of laws in the

new state after or post the reorganisation observing that the

principle of “clean state”, as it exists in the international law in

relation to the state succession, which means that the successor

state generally does not inherit the prior treaty obligations or rights

of a predecessor state, is different from the adjustment of

territories which the Parliament undertakes and enforces under

Article 3. The reorganised states do not usually start as tabula

rasa, rather they are successors of the pre-existing erstwhile

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 30 of

38

States. Disorderly and chaotic situation would erupt if the new

state was to be created without any laws as on the date of its

creation. To overcome this interregnum and vacuum, the

Reorganisation Act(s) uniformly contain provisions which create a

legal fiction to the extent that the reorganisation of the State would

not affect the applicability of laws to all the territories included

within it before and even after the reorganisation. However, this is

subject to another dictum/rule that the existing laws as earlier

applicable to the territories would be applicable to the new state

until the new state provides for adaptation or modification of the

law by way of repeal or amendment. The time period provided for

such adaptations and modifications is generally two years from the

appointed day, i.e. the day by which the Central Government in

the Official Gazette provides for the creation of the two states by

transfer of territories from one state to another.

21.The Constitutional Bench judgment in M.P.V. Sundararamier &

Co. v. State of Andhra Pradesh and Another

5

, had 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

5

AIR 1958 SC 468

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 31 of

38

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 enacted by the

State of Madras. In terms of Section 53, the laws enacted by the

State of Madras would continue to operate as before. It had not

stipulated that the States would continue to be one. For clarity and

convenience, we would reproduce paragraph 60 of the said

judgment, which reads as under:

“60. (VI) Another contention urged by the petitioners is

that the levy of tax proposed to be made by the Andhra

State on the sale of yarn by them to dealers in the

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 32 of

38

State of Andhra is illegal because under the Madras

Act and the Rules made thereunder, where there are

successive sales of yarn the tax can be imposed at

only one point, and as the Government of Madras had

already imposed a tax on the sale within that State, a

second levy on the selfsame goods by the State of

Andhra is unauthorised and that therefore the

threatened proceedings for assessment are

incompetent. This contention is clearly untenable.

When the Madras Act provides for a single levy on

successive sales of yarn, it can have only application to

sales in the State of Madras, as it would be

incompetent to the Legislature of Madras to enact a

law to operate in another State. But it is argued that

S.53 of the Andhra State Act, 1953 on its true

interpretation enacts that though for political purposes

Andhra is to be regarded as a separate State, for the

enforcement of laws as they stood on that date it

should be deemed to be a part of the State of Madras.

We do not agree with this interpretation. In our opinion,

S. 53 merely provides that the laws in existence in the

territories which were constituted into the State of

Andhra should continue to operate as before. In fact,

by an Adaptation Order issued on November 12, 1953,

even the name of Andhra was substituted for Madras in

the Madras General Sales Tax Act. There is no

substance in this contention.”

22.In the context of the above provisions of the Reorganisation Act,

we would now reproduce relevant portion of the judgment of the

Division Bench of High Court of Andhra Pradesh in Sri Peera

Mohammad Mahamood Saheb v. The State of Andhra

Pradesh (supra), which had also dealt with the situation pursuant

to bifurcation of the State of Madras into the reorganised State of

Madras and the new State of Andhra. Referring to identical

provisions, it was held that Section 3 of the Andhra State Act,

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 33 of

38

1953 states that the territories enumerated would, from the

appointed date i.e. 1

st

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 in

paragraph 29. The effect of Sections 84 and 85 of the Bihar

Reorganisation Act, 2000 was to ensure continuity of laws enacted

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 34 of

38

by the unified State of Bihar in the new State of Jharkhand which

had been created by transfer of territories which earlier formed

part of the State of Bihar. These sections incorporating a deeming

fiction were to ensure that the new State of Jharkhand would

continue to be governed by the pre-existing laws as, otherwise,

there would be a disorderly and chaotic situation where the new

State would not be governed by any law. This is the true effect of

the legal fiction created by Section 84 of the Bihar Reorganisation

Act, 2000, i.e., the reorganisation of the state would not affect the

applicability of the existing laws in the state to all territories

included within it before and even after the reorganisation. The

said fiction does not postulate and cannot be extended to imagine

that for the purpose of sale transactions or even for other

purposes, the new state did not have any political and

constitutional existence as a separate state and that till a new law

was enacted, the two States were to be treated as one political

State as it was before the reorganisation. The sale transactions

which were hitherto intra-state sales being within the unified State

of Bihar, would become inter-state transactions once the two new

States had come into existence. Provisions do not stipulate that

such transactions would continue to be treated as intra-state

transactions notwithstanding creation of the new State.

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 35 of

38

24.With respect to reasoning given in paragraph 30 in Swarn Rekha

Cokes and Coals Pvt. Ltd. (supra), we would acknowledge that

creation of a new State was an unforeseen event and could give

rise to unusual situations, but this cannot be a ground and reason

to treat inter-state sales between the two successor states as

intra-state sales. This would be contrary to the Constitution and

even the Statute i.e. the Reorganisation Act. Whenever a new

State is created, there would be difficulties and, issues would arise

but these have to be dealt within the parameters of the

constitutional provisions and the law and not by negating the

mandate of the Parliament which has created the new state in

terms of Article 3 of the Constitution. Creation of the new political

State must be given full legal effect. We would, therefore,

respectfully overrule 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

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 36 of

38

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 filed by them and the present proceedings. As

recorded above, some of the private parties/assessee had

succeeded before the High Court. We would observe that it will be

open to the private parties/assessee to challenge the adjudication

orders in accordance with law and if required, by filing application

under Section 14 of the Limitation Act, 1963, or other applicable

provisions of the state enactments for exclusion of time during

which the proceedings have remained pending before the High

Court and this Court. In such cases, it would be appropriate for the

authorities to exclude such time period as we are overruling the

Civil Appeal arising out of SLP (C) No. 23592 of 2014 & Ors.Page 37 of

38

ratio laid down in paragraphs 29 and 30 in Swarn Rekha Cokes

and Coals Pvt. Ltd. (supra).

26.Accordingly, the appeals arising from Special Leave Petition (Civil)

Nos. 10520 of 2013, 1334, 10165, 23297, 23592 of 2014, 6729

and 16550 of 2016 preferred by the State of Madhya Pradesh and

the State of Chhattisgarh are allowed and the Civil Appeal Nos.

460, 461, 7073 of 2005 and 2343 of 2007 preferred by the private

parties/assessee are dismissed in terms of the aforesaid

observations, findings and directions.

......................................CJI

(RANJAN GOGOI)

......................................J.

(S. ABDUL NAZEER)

......................................J.

(SANJIV KHANNA)

NEW DELHI;

JULY 09, 2019.

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