Sales tax exemption survives State reorganisation when a pre-existing industrial policy notification remains unmodified in the affected territory.

An exemption notification issued under a pre-reorganisation industrial policy was treated as continuing in the relevant territory after State reorganisation unless it was lawfully modified, repealed, or altered. The governing principle was that the statutory fiction preserving laws in force immediately before the appointed day also preserves such exemption benefits for the affected area. On that basis, the industrial unit did not lose its accrued sales tax exemption merely because the parent State was reorganised, and the petitioners could claim the benefit for the eligible period.

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Issues: Whether the exemption from sales tax available to the supplying unit under the pre-reorganisation notification continued to operate after the creation of the new State, so that the petitioners could claim the same benefit for the relevant assessment period.

Analysis: The controlling principle was that benefits flowing from a valid exemption notification issued under the industrial policy do not automatically cease on reorganisation of the parent State. The cited precedent held that the statutory fiction under the reorganisation law preserves the operation of laws in force immediately before the appointed day within the relevant territories, and that such notifications continue until modified, repealed, or altered by the competent authority. Applying that principle, the earlier exemption granted to the industrial unit was not lost merely because the territorial reorganisation had occurred, and the benefit continued to accrue for the eligible period.

Conclusion: The petitioners were entitled to claim the continued benefit of the exemption after reorganisation, and the contrary view taken by the authorities could not stand.

Final Conclusion: The petitions succeeded on the substantive exemption issue, and the matter was sent back for fresh decision in conformity with the governing legal principle.

Ratio Decidendi: An exemption notification granted under a pre-reorganisation industrial policy continues to operate in the affected ories after State reorganisation until it is lawfully modified, repealed, or altered, and the beneficiary does not lose the accrued exemption merely because the territorial unit is split into a new State.

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