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Taxation – Sales Tax – Madhya Pradesh Reorganisation Act, 2000 – ss.78, 79, 80, 85 and 86 – Bifurcation of erstwhile unified State of Madhya Pradesh into two States, namely, a reorganised State of Madhya Pradesh and the new State of Chhattisgarh in terms of the Madhya Pradesh Reorganisation Act – Effect of, on exemption or benefit of deferment of sales tax granted under Madhya Pradesh Commercial Tax Act, 1994 read with the applicable rules – Deeming provision envisaged in s.78 – Whether industrial units, which were granted exemption and were after 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 – Held: No – The second part of s.78 incorporates a deeming fiction, the effect whereof, is that the laws enacted by 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 – On and from the appointed date of 1st 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 intrastate 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 Art. 286 of the Constitution as it stood before amendment on 16th September, 2016 – Madhya Pradesh Commercial Tax Act, 1994 – Madhya Pradesh General Sales Tax Act, 1958 – s.12 – Central Sales Tax Act, 1956 – s.8(5) – Constitution of India – Art.286 (before amendment on 16-09-16) – Legal Fiction – Deeming provision.Taxation – Inter-state Sales – Reorganisation of States – Creation of two new successor States from one State – Effect – Held: Creation of a new State can 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 Art.3 of the Constitution – Creation of the new political State must be given full legal effect – Constitution of India – Art.3.Re-organization of States – Theory of continuity of laws in new State after or post the reorganisation – Held: 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 adjustment of territories which the Parliament undertakes and enforces u/Art. 3 – The reorganised states do not usually start as tabula rasa, rather they are successors of the preexisting erstwhile States – 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 – Madhya Pradesh Reorganisation Act, 2000 – ss. 78 and 79 – Bihar Reorganisation Act, 2000 – ss.84 and 85 – Doctrines / Principles – Theory of continuity of laws – Principle of “clean slate” – Constitution of India – Art.3.Madhya Pradesh Reorganisation Act, 2000 – s.85 – Meaning and effect of the primacy given to provisions of the Reorganisation Act in terms of s.85 – Held: s.85 of the Reorganisation Act states that provisions of the said enactment shall have effect notwithstanding anything inconsistent contained in any other law – Therefore, 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 (from the erstwhile unified State of Madhya Pradesh) which would henceforth have separate government(s) comprising of different legislature and executive.Interpretation of Statutes – Pari materia provisions – Bihar Reorganisation Act, 2000 – ss.84 and 85 – Bifurcation of erstwhile unified State of Bihar into two States, namely, a reorganised State of Bihar and the new State of Jharkhand – Effect and interpretation of ss.84 and 85 of the Bihar Reorganisation Act which are analogous to ss.78 and 79 of the Madhya Pradesh Reorganisation Act – Held: The effect of ss.84 and 85 of the Bihar Reorganisation Act was to ensure continuity of laws enacted 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 – Legal fiction created by s.84 of the Bihar Reorganisation Act – 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 intrastate sales being within the unified State of Bihar, would become inter-state transactions once the two new States had come into existence – Madhya Pradesh Reorganisation Act, 2000 – ss.78 and 79. Legal Fiction – Deeming provision – Purpose and objective – Held: 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.Words and Phrases – ‘Inter-state’ trade – Meaning – Difference between ‘intra-State’ and ‘inter-State’ sales – Held: As per Art. 286 of the Constitution, States are not competent to enact any legislation relating to taxation of ‘inter-state sales’ – The expression ‘inter-state’ trade has specific legal connotation and meaning – It refers to transfer or movement of goods from one State to another – Taxation – Sales Tax – Constitution of India, 1950 – Art. 286 (before amendment on 16-09-16). Practice and Procedure – New Plea – Contention raised by private parties/ assessee for the first time in Supreme Court – The contention was not raised in the writ petition before the High Court or even in pleadings before the Supreme Court – Supreme Court declining to decide the contention and leaving it open to the private parties / assessee to raise the plea before the authorities in appropriate proceedings under the statute – Taxation – Sales Tax – Inter-State transaction. |
