Inter-State Sales Between Successor States After Reorganization Cannot Be Treated As Intra-State Sales: SC [Read Judgment]

The Supreme Court observed that creation of a new political State must be given full legal effect and the inter-state sales between the two successor states cannot be treated as intra-state sales. The three judge bench comprising Chief Justice of India Ranjan Gogoi, Justice S. Abdul Nazeer and Justice Sanjiv Khanna, in State of MP vs. Lafarge Dealers Association, overruled the contrary observations made in an earlier Supreme Court judgment in Commissioner of Commercial Taxes, Ranchi and Another v. Swarn Rekha Cokes and Coals Pvt. Ltd.Before the three judge bench, the issue in the appeal was whether the industrial unit in the reorganized 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. It noticed that, in the context of Bihar Reorganization Act, the Supreme Court in Swarn Rekha case has held 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. The bench observed that though there is a legal fiction that re-organisation 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 reorganization, 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 re-organisation. The bench said: "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" Overruling the contrary observations made in Swarn Rekha Case, the bench said: "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."Click here to Download JudgmentRead Judgment

Inter-State Sales Between Successor States After Reorganization Cannot Be Treated As Intra-State Sales: SC [Read Judgment]

Ashok Kini

"Creation of the new political State must be given full legal effect. "

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Ashok Kini

Inter-State Sales Between Successor States After Reorganization Cannot Be Treated As Intra-State Sales: SC [Read Judgment]

Ashok Kini

"Creation of the new political State must be given full legal effect. "

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Ashok Kini

This is a premium content
Available exclusively to
Our subscribers