Madhya Pradesh High Court
M/S Sealwell Through Partner Mr. ... vs Commercial Tax on 12 August, 2025
Author: Vivek Rusia
Bench: Vivek Rusia
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
-1- VATA 25-2022 & Ors.
IN THE HIGH COURT OF MADHYA PRADESH
AT I N D O R E
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE BINOD KUMAR DWIVEDI
th
ON THE 12 OF AUGUST, 2025
VALUE ADDED TAX APPEAL No. 25 of 2022
M/S BLUE CHIP FELT THROUGH THE PROPRIETOR, MR. ASHOK
CHORDIA
Versus
COMMERCIAL TAX
WITH
VALUE ADDED TAX APPEAL No. 24 of 2022
M/S BLUE CHIP FELT THROUGH PROPRITOR MR. ASHOK CHORDIA
Versus
COMMERCIAL TAX
VALUE ADDED TAX APPEAL No. 26 of 2022
M/S SEALWELL INDUSTRIES THROUGH PARTNER MR. ABHIMANYU
CHORDIA
Versus
COMMERCIAL TAX
VALUE ADDED TAX APPEAL No. 27 of 2022
M/S SEALWELL THROUGH PARTNER MR. ABHIMANYU CHORDIA
Versus
COMMERCIAL TAX
Appearance:
Shri Aditya Goyal - Advocate for the appellants.
Shri Bhuwan Gautam - Government Advocate for the respondents/State.
Reserved on: 21.07.2025
Pronounced on: 12.08.2025
______________________________________________________________________________________________________________________________________________________
Signature Not Verified
Signed by: SREEVIDYA
Signing time: 12-Aug-25
6:49:52 PM
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
-2- VATA 25-2022 & Ors.
JUDGMENT
Per: Justice Vivek Rusia
Regard being had to the similarity of controversy involved in the
aforementioned appeals, they are being heard analogously and disposed of by
this common order.
2. This bunch of VAT Appeals have been filed by the appellants being
aggrieved by the orders dated 29.12.2021 passed by the M.P. Commercial Tax
Appellate Board, Bhopal, Bench at Indore in the respective cases as mentioned
below:
Case No. A/109/CTAB/IND/17
Case No. A/111/CTAB/IND/17
Case No. A/274/CTAB/IND/16
Case No. A/110/CTAB/IND/17
Case No. A/107/CTAB/IND/17 (VAT)
VATA No. 24/2022 Case No. A/273/CTAB/IND/16 (VAT)
Case No. A/108/CTAB/IND/17 (VAT)
Case No. A/114/CTAB/IND/17
VATA No. 26/2022 Case No. A/275/CTAB/IND/16
Case No. A/115/CTAB/IND/17
Case No. A/112/CTAB/IND/17 (VAT)
VATA No. 27/2022 Case No. A/276/CTAB/IND/16 (VAT)
Case No. A/113/CTAB/IND/17 (VAT)
3. Vide impugned orders dated 29.12.2021, the appeals preferred by the
appellants against the first appellate orders in respect of various financial years
w.e.f. 01.04.2008 to 31.03.2014 have been dismissed, and the orders passed by
the Assessment Officer have been upheld.
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
-3- VATA 25-2022 & Ors.
For the sake of convenience, the facts of VATA No. 25 of 2022 are being
taken, which are as under :
4. The appellant is a partnership firm engaged in the manufacturing of Felt
Components. The appellant manufactures Felt of various shapes and sizes
according to the demand of the industries. This Felt is exclusively supplied and
used in manufacturing plants as one of the components of the machine.
5. A dispute arose in respect of the classification of the Felt under the MP
VAT Act, 2000 (hereinafter referred to as the 'VAT Act'). According to the
petitioner, the 'Felt' is a textile structure composed entirely of fibres physically
interlocked by mechanical work. Hence, the same is liable to be classified as a
'Fabric' under Entry No. 48 of Schedule I and from 01.08.2019 to 31.03.2012
under Entry No. 34 of Schedule II Part II of the VAT Act and taxed at the rate of
4% - 5%. On the contrary, according to the respondent, Felt is a 'Machinery Part'
falling under Schedule-II Part IV Entry 1 and liable to be taxed at the rate of
12.5% - 13%.
6. With respect to the assessment year 2008-09 and 2009-10, the appellant
was assessed and levied VAT at the rate of 4% on the sale of Woollen Felt
Component, treating it to be Fabric. Thereafter, the assessment was reopened on
the basis of an audit objection and VAT at the rate of 13% was levied, treating it
as Machinery Part. Accordingly, for the subsequent years 2012-13 and 2013-14,
the appellant has been assessed and directed to pay the VAT at the rate of 13%.
Appellant preferred an appeal before the appellate authority, but the same was
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
-4- VATA 25-2022 & Ors.
dismissed. Thereafter, the appellant approached the M.P. Commercial Tax
Appellate Board and vide impugned order dated 29.12.2021, all the appeals were
dismissed. Hence, this appeal is before this Court.
7. The learned counsel of appellant has proposed the following substantial
question of law in these appeals :
(1) Whether the impugned order was wrong to classify 'Felt
Component' under the residuary entry when it should have
fallen under Entry 34 of Schedule II Part II dealing with
'Fabrics'?
(2) Whether the courts below while passing the Impugned Order
has failed to appreciate that true nature and essential
characteristics of 'Felt Component' while determining its
classification under the MP VAT Act?
(3) Whether the Impugned Order is erroneous as being guided
merely on the basis of nomenclature of the product (Woollen
Felt Component) while determining its classification under the
MP VAT Act?
(4) Whether the Impugned Order is erroneous for relying upon
orders passed under the previous tax regimes to determine the
classification under of Woollen Felt Component under the MP
VAT Act?
(5) Whether the courts below, while passing the Appellate Order
and Impugned Order, have failed to appreciate that an
assessment cannot be reopened merely on the basis of an audit
report and a change of opinion?
(6) Whether the Impugned Order wrong to classify 'Felt
Component' Schedule II Part II, dealing with 'Fabrics'?
Submissions of the counsel for the appellants
8. Shri Aditya Goyal, learned counsel appearing on behalf of the appellant
submitted that the Appellate Board has wrongly treated the Woolen Felt
Component as machinery part contrary to the settled law that for the purpose of
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
-5- VATA 25-2022 & Ors.
taxation what is to be considered is the inherent and essential characteristics of
the goods and not the nomenclature given to it by the recipient. The Apex Court
in the case of Porritts & Spencer (Asia) Ltd. Vs. State of Haryana, (1979) 1
SCC 82 has held that 'dryer felts' used in the paper industry cannot be held to be
a machine part where it comes under the category of 'textiles'. It is observed that
the use of textiles in a fast-developing economy is manifold, and it is quite
common to find 'textiles' being used even for industrial purposes. Shri Goyal
learned counsel submits that by applying the same logic, the word Felt can be
referred to as 'fabric' and not a machinery part. Hence, the orders passed by the
subordinate taxing authorities are contrary to the decision of the Apex Court in
the case of Porritts & Spencer (supra).
9. It is further submitted that since there is no specific entry for Woollen Felt
Component, it would not fall under the Schedule II Part IV Entry 1, i.e.
Residuary Entry under the VAT Act. However, the Residuary Entry can be
applied when, even by literal construction, the specific entry cannot cover the
goods in question. In the present case, as argued above, the Woollen Felt is
treated as a textile; therefore, the word fabric, which is provided in the Schedule
II Part II Entry 34, can be taken into consideration for taxation purposes. In
support of this contention, Shri Goyal learned counsel has placed reliance on the
judgment passed by the Apex Court in case of Mauri Yeast India Private
Limited vs. State of Uttar Pradesh & Anr., (2008) 5 SCC 680 wherein the Apex
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
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Court held that, if there is a conflict between two entries one leading to an
opinion that it comes within the purview of the tariff entry and another the
residuary entry, the former should be preferred.
10. Shri Goyal, learned counsel, has also referred to various dictionaries in
which the word Felt is defined as a thick cloth made from wool, hair or other
fabrics packed tightly together.
Submissions of the counsel for the respondent
11. Shri Bhuwan Gautam, learned Government Advocate appearing for the
respondent/State, submits that the learned Appellate Board, upon applying the
common parlance / popular test, has passed the well reasoned order denying to
classify 'Woolen Felt Component' as fabric under Schedule II Part II Entry 34
when it is essentially used as a machinery part. The Appellate Board has
appreciated the earlier orders passed under Section 42-B of the M.P.General
Sales Tax Act, 1958 and Section 70 of the M.P. Value Added Tax Act, 2002 and
maintained the consistent view that the Woollen Felt Component is a machinery
part and not a fabric.
12. Shri Gautam, learned Government Advocate has placed reliance on a
judgment passed by the Apex Court in case of Westinghouse Saxby Farmer Ltd.
vs. Commissioner of Central Excise Calcutta, (2021) 5 SCC 586 wherein it has
been held that the common parlance test of commercial usage test are the most
appropriate tests for classification of a product in a taxing statute. Hence, no
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
-7- VATA 25-2022 & Ors.
interference is liable to be made as no question of law is involved in the case,
and the appeals deserve to be dismissed.
Appreciation and Conclusion
13. It is not in dispute that the appellants are manufacturing 'Felt' for supply to
the industries as per their requirement. The appellant has not disputed the fact
that the manufactured Woollen Felt Component is not being used as a machinery
part. The appellants' claim is totally based on the definition of the word 'Felt'
according to which it is a thick cloth made from wool, hair or other fabric.
Appellant is strongly placing reliance on Entry 48 of Schedule I, which is a
Fabric, i.e. towel, gamchha, chadar, quilt, cover, bed cover, handkerchief and
unbranded pillow covers. Entry 34 of Schedule II Part II says that Fabric other
than that specified in Schedule I, which is declared goods. Admittedly, the 'Felt'
cannot be used as a fabric for which the fabrics specified under Entry No. 48 of
Schedule I are used, i.e. for manufacturing of towels, gamchha, chadar, quilt,
cover, bed cover, handkerchief and unbranded pillow covers, etc. The appellant
has not given any example to show that the 'Woollen Felt Component' is being
used as a fabric or dress material. Though it is named as Felt, it is in fact used
mainly as a conveyor belt in the paper industry.
14. So far as the applicability of judgment passed by the Apex Court in case of
Porritts & Spencer (supra) in the present case is concerned, the Apex Court has
considered Item No. 30 of Schedule 'B' of the Punjab General Sales Tax Act,
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
-8- VATA 25-2022 & Ors.
1948 which relates to all varieties of cotton, woolen or silken textiles including
rayon, artificial silk or nylon whether manufactured by handloom or powerloom
or otherwise, but not including pure silk fabrics, carpets, etc. The question was
whether the 'dryer felt' manufactured by the assessee fell within the category of
goods to be exempted from sales tax by treating it as a textile, as provided in
Item 30 of Schedule B of the Punjab General Sales Tax Act, 1948. In the
aforesaid Schedule, there is a consideration of all variants of cotton and woollen
manufactured by handloom, power loom or otherwise, hence treated as textile.
But in the M.P. VAT Act, 2002, Entry 48 of Schedule I is in respect of the Fabric,
i.e. towel, gamchha, chadar, quilt cover, bed cover, handkerchief and unbranded
pillow cover, etc. Therefore, this Entry is by name of product and not
generalised as in the case of Item No. 30 of Punjab General Sales Tax Act, 1948,
which covers all varieties of cotton, silk and woollen manufactured by
handloom, powerloom or otherwise. However, in Entry 48 of Schedule I, there is
no such word as 'all variant', 'manufactured by handloom, powerloom or
otherwise'. Hence, the judgment passed in the case of Porritts & Spencer
(supra) will not apply in the case of the present appellants.
15. In view of the discussion in the foregoing paragraphs, we do not find any
question of law in these appeals to interfere with the impugned orders dated
29.12.2021 passed by the MP Commercial Tax Appellate Board. Accordingly,
the appeals deserve to be and are hereby dismissed.
NEUTRAL CITATION NO. 2025:MPHC-IND:21607
-9- VATA 25-2022 & Ors.
A copy of this order be placed in the record of connected VATA Nos. 24 of
2022, 26 of 2022 and 27 of 2022.
(VIVEK RUSIA) (BINOD KUMAR DWIVEDI)
JUDGE JUDGE
vidya
