Read Landmark Judgment Pronounced Today on Legal Effect of Bifurcation of States

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Title of the Case – Legal Effect of Bifurcation of the State of Madhya Pradesh into the Successor State of Madhya Pradesh and the State of Chhattisgarh

Name of the caseThe State of Madhya Pradesh vs. Lafarge Dealers Association, C.A. No. 5302 of 2019 (@SLP (C) No. 23592 of 2014)

Date of Judgment 09th July, 2019

Judges: Chief Justice of India Ranjan Gogoi, Justice S. Abdul Nazeer and Justice Sanjiv Khanna

Subject and sections involved Madhya Pradesh Reorganisation Act, 2000 and Madhya Pradesh Commercial Tax Act, 1994

Issue:

  1. Whether the industrial unit in the reorganised 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 ne of the two states.

 

Fact of the Case:

  • State Reorganisation Act, has created two separate state; State of Madhya Pradesh and State of Chhattisgarh.
  • After the bifurcation, the question of benefit of the exemption or determination of sales tax on industrial unit was questioned.
  • The matter in dispute is, whether the benefit of the exemption or determination of sales tax would be restricted and confined to the boundaries/limits of the state in which the unit was located and would not operate beyond the limits of the state boundary.

Ratio of the case -

The three-judge bench of Supreme Court while overruling the reasoning placed in Swarn Rekha Cokes and Coals Pvt. Ltd. said that though the 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 which would be contrary to the constitution and even the Statute i.e, the Reorganisation Act.

It was further held that whenever a new State is created, there wold 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.