TMI Blog2004 (5) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been either modified, amended or altered by the State of Jharkhand and, therefore, it must continue to operate in the State of Jharkhand till such time as it is modified, repealed or altered in the manner prescribed by Section 85 of the Act. - Appeal (civil) 7798 of 2002, Civil Appeal No. 2450/2003 - - - Dated:- 7-5-2004 - N. Santosh Hegde And B. P. Singh,JJ. JUDGMENT Leave granted in S.L.P. (c) No.13401 of 2003. In this batch of appeals by special leave, common questions of law arise for determination which for their answer depend on the interpretation of sections 2(f), 84 and 85 of the Bihar Re-Organization Act 2000 (Act 30 of 2000) enacted by the Parliament (hereinafter referred to as the "said Act") which on and from the appointed day created the new State of Jharkhand comprising the districts specified in section 3 thereof which formed part of the erstwhile State of Bihar. It is undisputed that the Central Government by Notification published in the Official Gazette appointed the 15th of November 2000 as the appointed day. The core question which arises in these appeals is whether on bifurcation of the existing State of Bihar, and creation of the State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant unless and until, the State of Jharkhand granted a similar exemption, the respondent was bound to pay tax and remit the same to the State of Jharkhand. The Letters Patent Appeal was dismissed by the High Court by its judgment and order of April 2, 2002 upholding the contention of the respondent and finding them entitled to the said benefit. In the appeal arising out of S.L.P.(C) No.13401 of 2003, the facts are similar and a learned Single Judge of the Patna High Court following the aforementioned judgment of the High Court in Swarn Rekha Cokes and Coals Pvt. Ltd., allowed the batch of writ petitions by his judgment and order of July 18, 2002. The said judgment of the learned Single Judge was challenged in a Letters Patent Appeal preferred by the State of Jharkhand being L.P.A. No.102/2003. A Division Bench of the High Court dismissed the same by its order of 10th February 2003 finding no error in the judgment which followed an earlier binding precedent. The State of Jharkhand has preferred S.L.P.(c) No.13401/2003 challenging the judgment and order of the High Court in the Letters Patent Appeal. Civil Appeal No.2450/2003 has been preferred by the Associated Cement Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xistence of two States, the benefit thereof could not be claimed in respect of inter-State sale transactions and, therefore, such benefits could not be claimed in respect of raw materials purchased in the State of Jharkhand for consumption in the production of finished goods in the State of Bihar. At the threshold, we may notice the relevant provisions of the Act. Part II of the Act consists of only 4 sections and out of them Sections 3 and 4 are relevant. Under Section 3, on and from the appointed day, a new State known as the State of Jharkhand is created. Sections 3 and 4 read as follows:- "3. On and from the appointed day, there shall be formed a new State to be known as the State of Jharkhand comprising the following territories of the existing State of Bihar, namely:- Bokaro, Chatra, Deogarh, Dhanbad, Dumka, Garhwa, Giridih, Godda, Gumla, Hazaribagh, Kodarma, Lohardaga, Pakur, Palamau, Ranchi, Sahebganj, Singhbhum (East) and Singhbhum (West) districts;and thereupon the said territories shall cease to form part of the existing State of Bihar. 4. On and from the appointed day, the State of Bihar shall comprise the territories of the existing State of Bihar other than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation before the Competent Authority of the Finance (Commercial Taxes) Department, and had been granted the certificate of exemption will be entitled for exemption from payment of sales tax on purchase of their direct raw materials required for manufacturing subject to the terms and conditions laid down therein. The notification provided that the benefit of exemption from payment of sales tax on purchase of raw materials will be available for a period of 10 years from the date of production to the Units situated in Class-A Districts and for a period of 8 years to those Units situated in Class-B Districts classified in Industrial Policy 1995. Clause 14 of the notification provided for exemption from payment of sales tax on purchase of direct raw materials to such Industrial Units which commenced its production on extended capacity after having undergone expansion/diversification/modernization. The conditions which they are required to fulfill for grant of exemption have been laid down in clause 15 thereof. After the State of Jharkhand came into existence with effect from November 15, 2000, it issued a notification No.17 dated 15.12.2000. The said notification is reproduced below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial Policy of the State of Jharkhand did not deal with the incentives already granted under the Industrial Policy of the State of Bihar before the creation of the State of Jharkhand. On June 1, 2002, a Circular was issued by the Commissioner of Commercial Taxes, Jharkhand, the relevant portion whereof has been produced before us as Annexure P-7 in Civil Appeal No.3765/2003. The relevant part of the Circular reads as follows: "Jharkhand Government Finance (Commercial Taxes) Department letter No.1259/Ranchi, dated 1.6.02 issued by Shri Rahul Sarin, Secretary cum Commissioner Commercial Taxes, Jharkhand, Ranchi, addressed to All Joint Commissioners Commercial Taxes (Administration), All Circle Incharge. Subject:- Notifications S.O.478, 479, 480 and 481 dated 22.12.95 issued in terms of the Industrial Policy of 1995 and S.O. 57, 58, 59 and 60 dated 02.03.2000 relating to grant of exemption certificates for continuance of the incentives in the State of Jharkhand. Following clarifications were sought from the Regional Offices of the Commercial Tax Department. (i) Those industrial units in whose favour Exemption Certificates have been issued under S.O. 478, 479, 480 and 481 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue a Writ of Mandamus to the State of Jharkhand. Shri Verma, however, did not dispute the legal position that in view of the definition of the term 'law' under section 2(f) of the Act, the exemption granted by the erstwhile State of Bihar by issuance of notification under section 7(3)(b) of the Bihar Finance Act 1981 must be deemed to be "law" for the purpose of sections 84 and 85 of the Act. Shri Rakesh Dwivedi, appearing for the State of Bihar in Civil Appeal No. 2450/2003 submitted that in this appeal exemption was not granted from payment of sales tax on the sale of finished goods. The benefit of exemption was granted to tax payable on the purchase of raw materials for the incremental production. According to him, the erstwhile State of Bihar gave certain benefits to the new Units which were set up in the State of Bihar or which had invested in the expansion/ diversification of existing industries, because the ultimate benefit-direct or indirect-accrued to the State of Bihar. After the State of Jharkhand was created, such Units, as they fell outside the territories of State of Bihar as reconstituted, did not provide any benefit to the State of Bihar and, therefore, there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erally construed as advocated by the appellant. Mr. K. Parasaran, appearing on behalf of the respondent in Civil Appeal arising out of S.L.P.(c) No. 13401/2003 submitted that the objection taken as to the jurisdiction of the Patna High Court to issue a writ against the State of Jharkhand was misconceived. He submitted that the notification of the State of Bihar which was sought to be enforced in the instant case was a part of the cause of action and, therefore, even if it was necessary that the adjudication must be in the presence of both the parties, they could approach either of the High Courts for relief. It cannot be said that the entire cause of action was solely in the State of Jharkhand. He relied upon the decision of this Court in A.B.C. Laminart Pvt. Ltd. and Another vs. A.P. Agencies, Salem reported in (1989) 2 SCC 163. He further submitted that in any case the objection was merely academic because it was the Commissioner of Commercial Taxes, Ranchi of the State of Jharkhand who preferred a Letters Patent Appeal before the High Court and never raised an objection before the Division Bench which heard the Letters patent Appeal on the ground of lack of jurisdiction. He fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant is situated at Sindri in the State of Jharkhand. In effect, the State of Bihar is seeking to tax, goods transferred from the factory to its establishment in Patna. The sales that are affected from Patna are naturally intra-State sales and, therefore the State of Bihar cannot be permitted to resile from the exemption granted by it. He submitted that the assessment of sales tax is done at Patna and these facts have not been adverted to by the High Court while dismissing the petition of the appellant. We shall first dealt with the submission urged on behalf of the appellant in Civil Appeal No.7798/2002 that the High Court of Judicature at Patna had no jurisdiction to entertain the writ petition and issue a Writ of Mandamus to the State of Jharkhand. We have earlier noticed that though the State of Jharkhand was not a party in the writ petition filed before the High Court at Patna, after a learned Single Judge of the High Court allowed the writ petition and granted the relief prayed for, the Commissioner of Commercial Taxes, Ranchi, Jharkhand State preferred a Letters Patent Appeal impugning the judgment and order of the learned Single Judge. In the Letters Patent App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gazette on 22.12.1995 being S.O. 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 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. 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 Re-organization 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 and Others vs. Balbir Singh and Others reported in (1976) 3 SCC 242, Sher Singh and Others vs. Financial Commissioner of Planning, Punjab and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industrial Policy of 25th August, 2001 and, therefore, the Industrial Policy of 1995 and the notification bearing S.O. 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's 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 15th November, 2000. In the instance 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 notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws 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 authorize 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 reorganization 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. We, therefore, find ourselves in agreement with the view of the Patna High Court in Civil Appeal No. 7798/2002. We hold that the benefit of exemption from payment of sales tax on purchase of raw materials in respect of new units or the benefit envisaged for units which have undertaken diversification or expansion are available to those units, if eligible under S.O. 478 dated 22.12.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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