Neutral Wire is used to carry power to light switch - is this legal?
This is fine in an existing setup...

This is the old way a switch loop was done, using the white wire to carry power to the switch and the black wire to carry the switched-hot back to the light.  For a dumb light switch, not having neutral at the switch is a nothingburger, so all's well that ends well.  There should be electrical tape wrapped around the white wire at each end to reidentify it as a hot, though -- if that's not the case, turn the circuit off at the breaker and add a wrap of black electrical tape around that white wire on each end.

However, new work works differently

In new work, though, this is not to Code.  The 2011 NEC added provisions for neutral (what Code calls the grounded conductor vs ground, which Code calls the equipment grounding conductor) at switch locations in 404.2(C) due to the proliferation of advanced "smart" switches, dimmers, timers, and suchnot that need constant power.  The alternatives involve returning that constant current through the load (which is incompatible with LED light bulbs and some other loads) or returning it on the equipment grounding system (which is a dirty hack).


  (C) Switches Controlling Lighting Loads. The grounded
  circuit conductor for the controlled lighting circuit shall be
  provided at the location where switches control lighting
  loads that are supplied by a grounded general-purpose
  branch circuit for other than the following:
  
  (1) Where conductors enter the box enclosing the switch
  through a raceway, provided that the raceway is large
  enough for all contained conductors, including a
  grounded conductor
  
  (2) Where the box enclosing the switch is accessible for
  the installation of an additional or replacement cable
  without removing finish materials
  
  (3) Where snap switches with integral enclosures comply
  with 300.15(E)
  
  (4) Where a switch does not serve a habitable room or
  bathroom
  
  (5) Where multiple switch locations control the same lighting load such that the entire floor area of the room or space is visible from the single or combined switch
  locations
  
  (6) Where lighting in the area is controlled by automatic
  means
  
  (7) Where a switch controls a receptacle load
  
  Informational Note: The provision for a (future) grounded
  conductor is to complete a circuit path for electronic lighting control devices.