State reorganisation and tax exemption: pre-existing Bihar relief continued in Jharkhand until lawfully altered

Pre-existing statutory exemption orders and certificates issued under the erstwhile Bihar regime continued to operate in Jharkhand after State reorganisation, because the reorganisation law preserved existing laws and extended their territorial application until validly altered, repealed or superseded by competent authority. The later Jharkhand industrial policy and 2002 notifications did not displace the earlier exemption, as they were issued under different provisions and did not expressly revoke or modify the existing relief. A possible inter-State character of the coal purchase also did not defeat the exemption, because Central sales tax treatment was a separate assessment question and could not deny the benefit already granted under the State notification.

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Issues: (i) Whether statutory orders and exemption certificates issued under the erstwhile Bihar regime continued to operate in Jharkhand after reorganisation until altered, repealed or amended by the competent authority; (ii) Whether the later Jharkhand industrial policy and the notifications issued in 2002 displaced the earlier exemption granted under the Bihar Finance Act; (iii) Whether a possible inter-State character of the coal purchase could defeat the exemption already granted under the State exemption notification.

Issue (i): Whether statutory orders and exemption certificates issued under the erstwhile Bihar regime continued to operate in Jharkhand after reorganisation until altered, repealed or amended by the competent authority.

Analysis: The relevant provisions of the Bihar Re-organisation Act preserved the operation of laws in force immediately before the appointed day and extended the territorial references to the territories of the erstwhile State until otherwise provided by a competent Legislature or authority. The Act also enabled adaptation or modification of pre-existing law, and defined law broadly enough to include statutory orders and notifications. On that basis, the statutory order granting sales tax exemption, and the exemption certificate issued under it, did not lapse merely because the State was reorganised.

Conclusion: The exemption order and the certificate continued to bind the successor State of Jharkhand until lawfully modified, repealed or superseded.

Issue (ii): Whether the later Jharkhand industrial policy and the notifications issued in 2002 displaced the earlier exemption granted under the Bihar Finance Act.

Analysis: The later industrial policy dealt with industrial units established in Jharkhand and did not by itself annul exemptions already arising under the earlier statutory notification. The 2002 notifications were issued under different provisions dealing with different subjects and did not purport to repudiate, change, supersede or modify the exemption notification under which the respondent had been granted relief.

Conclusion: The later policy and notifications did not take away the respondent's existing exemption.

Issue (iii): Whether a possible inter-State character of the coal purchase could defeat the exemption already granted under the State exemption notification.

Analysis: The possible applicability of Central sales tax provisions was held to be a matter for assessment of the transaction and did not affect the subsisting exemption under the State notification. The respondent could not be denied the benefit of the exemption merely on the ground that the transaction might eventually attract Central sales tax treatment.

Conclusion: The exemption could not be refused on that basis.

Final Conclusion: The appeal failed, and the order recognising the respondent's entitlement to tax-free purchase of raw materials under the existing exemption regime was upheld.

Ratio Decidendi: On reorganisation of a State, pre-existing statutory orders and notifications continue to operate in the successor State, and remain binding until lawfully altered, repealed or superseded by competent authority; a later policy or unrelated notification does not by itself terminate such accrued exemption.

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