Summary
Continuation of pre-bifurcation laws did not treat Madhya Pradesh and Chhattisgarh as a single State for sales-tax purposes. Transactions between the successor States became inter-State transactions; the reorganisation provisions preserved laws within each State’s territorial limits rather than extending intra-State exemptions across the new boundary. Contrary reasoning in paragraphs 29 and 30 of Swarn Rekha was overruled. Any independently available inter-State exemption remained open for statutory examination.
Issues
- Whether continuation of existing laws after State reorganisation preserved intra-State tax treatment for transactions between the two successor States.
- Whether any exemption independently applicable to inter-State transactions could still be claimed.
Provisions considered
- Sections 2(f), 78–80 and 85, Madhya Pradesh Reorganisation Act, 2000Existing laws, including exemption notifications, continued separately within each successor State; the continuity fiction and overriding clause did not erase the legal effect of the new State boundary. (¶¶ 8–10, 14–18)
Held
- Section 78 preserved the application of existing laws in both States as separate laws within their territorial confines. Its fiction could not be extended to treat the two States as one for sales transactions. (¶ 14–18)
- The continuity principle in Swarn Rekha was accepted, but its contrary observations and ratio in paragraphs 29 and 30 concerning inter-State transactions were overruled. (¶ 23–24)
- The newly urged claim that exemption clauses independently benefited inter-State transactions was left for the statutory authorities. Assessees could challenge adjudication orders and seek exclusion of time spent in the High Court and Supreme Court under applicable provisions. (¶ 25)
Result
States’ appeals allowed and assessees’ Appeals 460, 461, 7073/2005 and 2343/2007 dismissed, subject to the observations and directions. Independent eligibility for inter-State benefits left open to statutory proceedings; authorities should appropriately exclude time spent in the court proceedings when considering permitted challenges to adjudication orders.