S.N. Jha, J.
1. The dispute in this appeal by the Commissioner and Joint Commissioner (Administration), Commercial Taxes Department, Government of Jharkhand, arising from a writ petition relates to the applicability of Statutory Orders made by the Governor of Bihar In the successor State of Jharkhand upon division of the State under the Bihar Reorganisation Act, 2000 and entitlement of respondent No. 1 to the benefits of sales tax exemption on purchase of raw materials in terms of Statutory Order 478 dated 22.12.1995 of the Commercial Taxes Department.
2. Respondent No. 1 M/s. Swarn Rekha Cokes and Coals Private Limited (hereinafter referred to as the respondent) filed writ petition, CWJC No. 11769/2000 (reported in 2002 (2) PLJR 299), seeking direction upon the respondents, namely, the officials of the Commercial Taxes Department, Government of Jharkhand and Bharat Coking Coal Limited (BCCL) to continue giving benefits of the exemption certificate dated 12.9.1997 granted by the Assistant Commissioner of Commercial Taxes, Madhubani in terms of S.O. 478 dated 22.12.1995 till 20.12.2006 i.e. for the validity period of the said certificate, by way of tax free purchase of the raw materials namely, coal from the BCCL with which the respondent has been granted the linkage. The case of the respondent is that acting pursuant to the Bihar Industrial Policy of 1995 it set up an industrial unit in 1997 for manufacturing special smokeless fuel (Domestic Coke), Coaltar and small size coal in accordance with the technology developed by the Central Mine Planning and Design Institute (CMPDI) after obtaining registration from the Industries Department vide Certificate No. 032302875 dated 17.2.1997 and sales tax registration from the Commercial Taxes Department vide Registration No. M/B 978 (R) dated 8.7.1997. The Industrial Policy of 1995 declared by the State of Bihar provides for various incentives to the new industrial units, one of the incentives being in the shape of sales tax exemption on purchase of raw materials as well as finished goods, vide para 16 of the Policy Resolution. (In this case we are concerned with exemption on purchase of raw materials). In order to carry out the said object, the Government of Bihar issued different statutory orders, one of them being S.O. 478 dated 22.12.1995 with respect to sales tax exemption on purchase of raw materials. The respondent in terms of the said policy and the corresponding statutory order applied for and was granted exemption certificate bearing Certificate No. 01 Exemp. dated 12.9.1997 by the Commercial Taxes Officer, Madhubani, valid for the period from 21.12.1996 to 20.12.2006. As per the said certificate the respondent claimed and was allowed the exemption from sale tax on purchase of coal @ 5000 metric tonnes per month by the BCCL with which it was linked by the CMPDI vide latter's letter No. 1506 dated 27.12.1996. The case of the respondent is that in terms of the aforementioned S.O. 478 dated 22.12.1995 and the exemption certificate it is entitled to purchase, tax free, raw materials i.e. coal from the BCCL up to 20.12.2006. However, division of the State of Bihar under the Bihar Re- Organisation Act has cast a cloud of doubt and dispute over its entitlement in the matter of tax free purchase of coal and in the circumstances it moved this Court by filing the writ petition giving rise to this Letters Patent Appeal.
3. The appellants, it may be mentioned, did not file any counter affidavit before the learned Single Judge. In fact, notice does not seem to have been issued to them by the learned Judge (No such grievance was made at the time of hearing of the appeal). The BCCL, however, filed a counter affidavit taking the stand that after bifurcation of the State the exemption granted to the petitioner (read respondent) will not be applicable as BCCL is at Dhanbad which is within Jharkhand State and therefore the old exemption which was applicable in the State of Bihar will not be applicable in the State of Jharkhand. The respondent Company is duty bound to realise tax and remit to the State of Jharkhand unless and until fresh exemption order is issued by the State of Jharkhand or the dispute is settled between the States of Bihar and Jharkhand.
4. The learned Single Judge held that in view of the provisions of Sections 84 and 85 read with Section 2 (f) of the Bihar Re-Organisation Act until and unless Jharkhand State either adopts or modifies any law by repeal or amendment, the law which is applicable in the State of Bihar will continue to apply in the territories which are at present under the Jharkhand State for a period of two years from the appointed day during which the Jharkhand State may either adopt or modify the existing law of the State of Bihar but until that is done, the notifications, orders etc. issued by the State of Bihar will hold the field. Inasmuch as the notification dated 22.12.1995 under which the respondent had been allowed exemption by the State of Bihar prior to the appointed day has not been either repealed or amended, the effect of the notification will continue to be available to the respondent and it would be entitled to purchase, tax free, raw materials Le. coal as before, till the legislature or any competent authority of the Jharkhand State makes any amendment in this regard. The Government of Jharkhand through the Commissioner of Commercial Taxes and the Joint Commissioner of Commercial Taxes (Administration) Dhanbad, have come up in appeal against the said order.
5. Shri P.K. Shahi, learned counsel for the appellants, submitted that the notifications issued by Government of the erstwhile State of Bihar are not binding on the State of Jharkhand unless they are adopted by the Government of Jharkhand and therefore the respondent is not entitled to claim exemption on the basis of exemption certificate issued by the authority of Bihar under S.O. 478 dated 22.12.1995. As a matter of fact, counsel pointed out, vide notification No. 117 dated 15.12.2000 issued in terms of Article 283(2) of the Constitution of India and Section 85 of the Bihar Reorganisation Act, the Acts (specified in the notification) in vogue in the erstwhile State of Bihar, including the Bihar Finance Act, 1981, rules framed thereunder and the statutory forms, circulars and notifications etc. issued thereunder have been adopted, with modifications, with effect from 15.11.2000. Counsel submitted that the said notification could not be brought to the notice of the learned Single Judge. It may be mentioned here that by supplementary affidavit the appellants have brought on record notifications being S.O. 65, S.O. 66 and S.O. 67, all dated 12.1.2002, informing the Court that the Government of Jharkhand has issued statutory orders of its own and therefore S.O. 478 dated 22.12.1995 is no more applicable in the State of Jharkhand. It has also been stated that the Government of Jharkhand has declared its own industrial policy in 2001, effective from 15.11.2000, which together with the notifications occupy the field and therefore respondent can no more claim the benefit of tax free purchase of coal from any place in the State of Jharkhand. Counsel alternatively submitted that even if S.O. 478 dated 22.12.1995 is held to be applicable and binding on the Government of Jharkhand, purchase of coal from BCCL by the respondent may involve inter-State movement of the goods attracting the provisions of the Central Sales Tax Act.
6. Shri Ram Balak Mahto, learned counsel for the writ petitioner-respondent, submitted that in terms of Section 84 of the Bihar Reorganisation Act, notwithstanding the territorial change brought about by the Act resulting in creation of the State of Jharkhand, any law being in force immediately prior to the appointed day i.e. 15.11.2000 continues to apply to the territories comprising the State of Jharkhand until otherwise provided by the legislature or other competent authority of that State. And therefore not only S.O. 478 dated 22.12.1995 but also the exemption certificate dated 12.9.1997 issued thereunder remains valid and indeed binding on the authorities of the Government of Jharkhand, and the respondent is thus entitled to tax free purchase of coal from BCCL. In support of the contention Counsel placed reliance on a decision of the Apex Court in State of Punjab v. Balbir Singh, AIR 1977 SC 629. Counsel also referred to Article 252 of the Constitution and submitted that the Bihar Reorganisation Act being a law made by the Parliament with the consent of the State, the laws made by the erstwhile State of Bihar have to be treated as adopted by the successor State of Jharkhand, by fiction. It cannot take a different stand except in accordance with Sections 84 and 85 of the Reorganisation Act by repudiating or otherwise modifying or changing such law by Legislature or other competent authority.
7. After hearing counsel for the parties I am of the view that the submission advanced on behalf of the respondent are well founded and they must be accepted. The issue in hand is in fact fully covered by the decision of the Supreme Court in Balbir Singh's case mentioned above. But before noticing the relevant observations of the Supreme Court in that case it would be appropriate to refer to the relevant provisions of the Bihar Re-Organisation Act.
'84. Territorial extent of laws.--The provisions of Part II of this Act shall not be deemed to have effected any change in the territories to which any law in force immediately before the appointed day extends or applies, and territorial references in any such law to the State of Bihar shall, until otherwise provided by a competent Legislature or other competent authority be construed as meaning the territories within the existing State of Bihar before the appointed day.
85. Power to adapt laws.--For the purpose of facilitating the application in relation to the State of Bihar or Jharkhand of any law, made before the appointed day, the appropriate Government may, before the expiration of two years from that day, by order, make such adaptations and modifications of the law, whether by way of repeal or amendment, as may be necessary or expedient, and thereupon every such law shall have effect subject to the adaptations and modifications so made until altered, repealed or amended by a competent Legislature or other competent authority.
Explanation--.....'
The term 'law' has been defined in Clause 2 (f) to mean 'any enactment, ordinance, regulation, order, bye-law, rule scheme, notification or other instrument having, immediately before the appointed day, the force of law in the whole or in any part of the existing State of Bihar.
8. Upon construction of the provisions of Sections 88 and 2 (g) of Punjab Reorganisation Act, 1966 which are pari materia with Section 84 and Section 2 (f) of the Bihar Reorganisation Act, the Supreme Court held that though administrative orders are not law within the meaning of Section 2 (g) of the Act, i.e. Punjab Reorganisation Act and to that extent the interpretation of the Punjab High Court was correct, such a view would result in chaos in the administration of the new State. Thus allowing the State's appeal the Court held that unless and until the orders passed by the Government of the erstwhile State of Punjab are not modified, changed or repudiated by the successor State they will
continue to be in force in the successor State. In this regard the Supreme Court pointed out the distinction between coming into existence of a new State as result of accession, conquest, merger or integration on the one hand and by readjustment of territories on the other. After noticing the observations made by the Punjab High Court on the interpretation of Section 88 of the Act, the Supreme Court stated the law at pages 635-36 of the report as under :
'If this could be the position in the continuance of the law in the successor States, on what principles one can say that the administrative order made by the erstwhile State of Punjab automatically lapsed and came to an end on and from the appointed day on the coming into existence of the successor State. It is not possible to take the view that the Legislature when it made so many provisions in the Act in its various parts in regard to the matters already referred to, did not think it appropriate to make a provision for the continuance of the effect of the administrative orders passed by the Government of the erstwhile State of Punjab until the Governments of the Successor States modified or changed it? Or is it, as a matter of law and propriety, reasonable to think that the Legislature did not consider it necessary at all to make such an express provision, as the continuance of the effect of such orders was so obvious even without such a provision? In our judgment when there is no change of sovereignty and it merely an adjustment of territories by the reorganization of a particular State, the administrative orders made by the Government of the erstwhile State continue to be in force and effective and binding on the successor States until and unless they are modified, changed or repudiated by the Governments of the successor States. No other view is possible to be taken. The other view will merely bring about chaos in the administration of the new States. We find no principle in support of the stand that administrative orders made by the Government of the erstwhile State automatically lapsed and were rendered in effective on the coming into existence of the new successor States...... We are, therefore, of the opinion that the impugned orders passed by the Government of the erstwhile State of Punjab continued to be the orders of the Government of the concerned successor States until and unless they were modified, changed or repudiated by them.'
9. It is significant to mention that what had fallen for consideration before the Supreme Court was an administrative order not amounting to law within the meaning of Section 2 (g) of the Punjab Act--as held by the Punjab High Court with which the Supreme Court agreed. It was on general principles that extended meaning was given to the administrative orders and they were held to be applicable in the successor States. The present case stands on a much higher footing inasmuch as the basis of the claim of the respondent is a statutory order/notification which amounts to law by virtue of the inclusive definition of the term 'law' in Section 2 (f) of the Bihar Act,
10. The above categorical and definite enunciation of law by the Apex Court leaves no room for doubt about applicability and binding nature of the statutory orders/notification of the Government of the erstwhile State of Bihar in the successor State of Jharkhand. In fact, there is no necessity of its being 'adopted' as observed by the learned Judge. Under Section 84--unless repudiated or otherwise modified or superseded by a legislative mandate, they continue to be applicable and binding in the successor State.
11. So far as the Industrial Policy 2001 of the Government of Jharkhand is concerned reference to it by the appellants is wholly misplaced. The said Policy Resolution envisages giving certain tax benefits, among other things, to the new industrial units set up after 15.11.2000. It obviously refers to the industrial units situate in the State of Jharkhand and had nothing to do with the units situate outside the State. It has been referred to, perhaps, to point out that the Government of Jharkhand having declared an Industrial Policy of its own, the Industrial Policy of the erstwhile State of Bihar of 1995 came to an end and therefore, any tax benefit available to units there-
under also came to an end. If this is what the appellants intend to convey, it must be rejected out of hand, for, the Industrial Policy of the Jharkhand State relates to industrial unit situate in the State. Whether the industrial units situate outside the State are entitled to any such benefit has to be considered with reference to the statutory orders made under the Bihar Finance Act because notwithstanding the terms of the policy, unless corresponding provisions are made by issuing notifications/orders under the Bihar Finance Act to carry out the objects of the Industrial Policy, a trader does not get benefits of any sales tax exemption.
12. The notifications being, S.O. 65, S.O. 66 and S.O. 67 dated 12.1.2002 relied on behalf of the appellants also have no relevance whatsoever. They have been issued, respectively, under Sections 22, 23 and 13 (1) (b) of the Bihar Finance Act and not under Section 7 (3) (b). It may be mentioned that while Sections 22 and 23 of the Act provide for adjustment of the tax, or refund of tax, paid on the purchase of raw materials which have been used for manufacture of goods for sale within the State against the tax payable on sale of its product, Section 13 (1) (b) provides for a special or confessional rate of tax on sales or purchase of goods for use directly in the manufacture or processing of goods for sale in the execution of works contract. Said notifications thus relate to different subjects and do not in any manner repudiate, change, supersede or modify the statutory orders issued in terms of Section 7 (3) (b) of the Act including S.O. 478 dated 22.12.1995. It may be mentioned here that Section 7 is the exemption provision of the Bihar Finance Act relating to different situations and eventualities in which sale or purchase of goods is exempt from tax. While under Sub-section (1) no tax is payable in respect of sale or purchase of goods taking place in the course of inter-State trade or commerce, or outside the State, or in the course of import of goods into, or export of the goods out of the territory of India, under Sub-section (3) :
'The State Government may, by notification and subject to such conditions or restrictions as it may impose, exempt from the sales tax or purchase tax;
(a) sale of any goods or class or description of goods;
(b) sales of any goods or class or description of goods to or by any class of dealers;
(c) any sale or category or description of sales; and
(d) purchase of any goods by any class of dealers or any purchase or category or description of purchases of such goods.'
It is under Clause (b) of Sub-section (3) of Section 7 that S.O. 478 dated 22.12.1995 has been issued. The subject matter of the three notifications dated 12.1.2002 (supra) being different, the issuance thereof clearly would not amount to any change or modification much less repudiation or supersession of S.O. 478 dated 22.12.1995 which will therefore continue to be applicable in the State of Jharkhand and binding on the authorities of the Government of that State.
13. The argument with reference to the provisions of the Central Sales Tax Act is also wholly misconceived. The inter-State sale or purchase of goods falling under Sections 3, 4 and 5 of the Central Sales Tax Act, stand excluded by virtue of the provisions of Sub-clause (1) of Section 7 already referred to above. While any sale or purchase of goods taking place in the course of inter-State commerce can be taxed only under the Central Act sale or purchase taking place outside the State can be taxed only by that State where the sale or purchase takes place, the third category of sale or purchase i.e. in course of import of goods into or export of goods outside the territory of India cannot be taxed either under the Central Sales Tax Act or under the State Act. It is to be kept in mind that any question as to whether any sale of goods attracts the provisions of Central Sales Tax Act has to be considered by the Assessing Officer in course of assessment of the tax liability under the Bihar Finance Act or the Central Sales Tax Act. And therefore on the possibility of the transaction attracting the provisions of the Central
Sales Tax Act, the respondent cannot be denied benefit of tax exemption which is otherwise available to it in terms of statutory order under Section 7(1)(b) of the Bihar Finance Act. Thus the submission of the counsel for the appellants in this regard also is accordingly rejected.
14. Before concluding the matter it may be relevant to observe that the respondent having set up the unit pursuant to the Industrial Policy applicable to the entire erstwhile Statr of Bihar including the territories now comprising the State of Jharkhand, with a view to avail of different kinds of benefits/incentives including the one by way of sales tax exemption, the claim of the respondent can also be enforced on principle of promissory estoppel and legitimate expectation. The State of Jharkhand having come into existence with the consent of the erstwhile State on general principles also the State of Jharkhand cannot deprive the respondent of its rights except in accordance with law as per Section 84 of the Reorganisation Act. The legislative intent of the existing laws remaining in force until expiration of two years from the appointed day, under Section 85 of the Reorganisation Act, has also to be kept in mind.
15. In the above premises, I do not find any error in the order of the learned Single Judge upholding the claim of the respondent. The appeal is therefore dismissed. There will be no order as to costs.
T.P. Singh, J.
16. I agree.