Madhya Pradesh High Court
M/S Pidilite Industries Ltd vs The Commissioner Of Commercial Tax And 2 ... on 26 August, 2025
Author: Vivek Rusia
Bench: Vivek Rusia
NEUTRAL CITATION NO.2025:MPHC-IND:23825
1
W.P. No.14268 of 2010
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
WRIT PETITION No. 14268 of 2010
M/S PIDILITE INDUSTRIES LTD
Versus
THE COMMISSIONER OF COMMERCIAL TAX AND 2 ORS. AND
OTHERS
Appearance:
Shri P. M. Choudhay, learned Senior Counsel assisted by Shri Anand
Prabhawalkar, learned counsel for the petitioner.
Shri Sudeep Bhargava, learned Deputy Advocate General for the respondents /
State.
Reserved on : 06st August, 2025
Delivered on : 26th August, 2025
ORDER
Per : Justice Vivek Rusia
The present writ petition has been filed by the petitioner
under Article 226 of the Constitution of India assailing the legality,
validity and propriety of the order dated 31.08.2010 passed by the
Commissioner of Commercial Tax, Madhya Pradesh, Indore whereby
the petitioners product "Steel Grip Insulating Tape" has been
classified under the residuary entry in Entry No.1 of Part IV of
Schedule II of the Madhya Pradesh Value Added Tax Act, 2002
(herein after referred as "the MP VAT Act") attracting a higher rate of
tax and has also challenged the consequential assessment notices
issued thereafter by the respondent authorities for recovery of
NEUTRAL CITATION NO.2025:MPHC-IND:23825
differential tax.
FACTS OF THE CASE IN BRIEF
02. The petitioner is a public limited company incorporated under
the provisions of the Companies Act, 1956 engaged in the business of
manufacture and sale of a variety of consumer products and
speciality chemicals. It operates multiple manufacturing units in the
States of Maharashtra, Gujarat, Daman and Himachal Pradesh.
2.1. For the purposes of sales within the State of Madhya Pradesh,
the petitioner has been maintaining a sale depot at Indore since 1992
and is also registered under the under the M.P. VAT Act. The goods
manufactured in the petitioner's factories outside the State are
dispatched to this depot, from where sales are made within Madhya
Pradesh.
2.2. The petitioner was facing difficulty in classification of its
product Steel Grip Insulating Tape, hence, moved an application
dated 06.03.2010 under Section 70 of the M.P. VAT Act before the
Commissioner of Commercial Tax, M.P. seeking determination of the
correct rate of tax applicable by contending that the product is an
"insulator" covered by Entry No. 50 of Part - II of Schedule - II of
the M.P. VAT Act and attracts tax at the rate of 4% till 31.07.2009 and
5% from 01.08.2009.
2.3. In support of its contention, the petitioner submitted physical
sample of the product; flow chart of its manufacturing process and
technical data sheet; various VAT entries from other states classifying
similar products as "insulators" and further relied on the decision of
the CEGAT in Chetana Polycoat Pvt. Ltd. v/s Collector of Central
Excise reported in 1988 (37) ELT 253.
NEUTRAL CITATION NO.2025:MPHC-IND:23825
2.4. By order dated 31.08.2010 passed in Case No.4/10/70/XI, the
Commissioner of Commercial Tax relying on Circular No. CT/VAT
CEL/2004/292 dated 31.07.2006, which clarified that Steel Grip
Insulating Tape is taxable under the residuary entry in Part - IV of
Schedule - II at the rate of 12.5%, applying the principle that goods
are to be classified according to their meaning in common parlance
rather than their technical composition.
2.5. The Commissioner in the order observed that the product in
question is ordinarily traded as an electrical item sold by dealers
dealing in electrical goods and extensively used in electrical works
and thus on this basis held that the insulating tape falls within the
description of "electrical goods" in common parlance and is,
therefore, classifiable under the residuary Entry No.1 of Part - IV of
Schedule - II of the M.P. VAT Act attracting tax at the rate of 13%.
2.6. Based on the said determination, the Assessing Authorities
initiated proceedings for recovery of the differential tax liability and
issued Notice No. 428 dated 15.11.2010 and Notices Nos. 7832 and
7833 dated 22.11.2010 for the period 1.04.2010 to 30.09.2010,
thereby commencing the process of reassessment and recovery in
accordance with the provisions of the M.P. VAT Act.
2.7. Aggrieved by the action of the respondent authorities, the
petitioner has approached this Court seeking quashment of the
impugned order dated 31.08.2010 and all consequential notices, a
direction to levy tax on the product at the rate applicable to
"insulators" under Entry 50, Part - II, Schedule - II of the M.P. VAT
Act, 2002, and to restrain the respondents from imposing a higher
rate under the residuary entry or proceeding with assessment for any
NEUTRAL CITATION NO.2025:MPHC-IND:23825
period before 31.08.2010.
SUBMISSIONS OF PETITIONER
03. Shri P.M. Choudhary, Learned Senior Counsel appearing for
the petitioner submitted that the impugned determination order is
unsustainable as it is based on an erroneous understanding of the
nature and use of the commodity in question i.e. Steel Grip Insulating
Tape. The product is solely designed and used as an insulator to
prevent the flow of electrical current and to protect against electric
shock, and thus ought to have been classified under the specific entry
applicable to "insulators" carrying a lower rate of tax rather than
under the residuary entry attracting a higher rate.
04. Learned Senior Counsel submitted that the learned
Commissioner had failed to appreciate the functional character of the
product, which is well recognized by consumers and traders alike,
and instead relied merely on the fact that it is sold by dealers in
electrical goods or used by electricians. In the present case though the
product was sold by the dealers and used by electricians as electric
goods, but the dealers had sold it for use as insulators only and
electricians also used it as insulators only thus the learned
Commissioner should have classified on the basis of this inherent
properties and purpose of the product and not the trade channel
through which it was being sold.
05. Learned Senior Counsel further submitted that the
determination under Section 70 of the MP VAT Act is binding and
requires the commissioner to examine the nature, characteristics,
marketability and use of the commodity however, no such
examination has been done in the present case and instead the
NEUTRAL CITATION NO.2025:MPHC-IND:23825
commissioner has placed mechanical reliance upon a circular No.
292 dated 31.07.2006 without independent application of mind.
06. Learned Senior Counsel also submitted that Entry No. 50 of
Part - II of Schedule - II is a specific entry covering all commodities
having insulating properties or capable of being used as insulators,
and in the absence of any definition in the statute, the classification
must be guided by the specific entry which most accurately and
directly covers the commodity. It is settled law that where a specific
entry exists, recourse to a general or residuary entry is impermissible
and in cases of possible overlap between a specific and a general
entry, the specific entry must prevail, and in the event of ambiguity,
the interpretation favourable to the taxpayer is to be adopted.
07. Learned Senior Counsel submitted that the consequential
notices issued under Section 18(5) of the MP VAT Act are without
jurisdiction and premature, as this provision can be invoked only
when the returns filed by the dealer are found to contain incorrect
particulars after verification. The returns filed by the petitioner were
prepared in good faith on a genuine belief that the product is taxable
as an insulator, which was the view consistently accepted in earlier
assessments and that the returns cannot be treated as incorrect until
the classification matter attains finality.
08. Learned Senior Counsel submitted that any determination
under Section 70 of the MP VAT Act operates prospectively and
cannot be applied to past periods to justify retrospective demands and
prayed that the impugned order and notices be quashed and the
correct classification of the product under the entry of insulator be
made.
NEUTRAL CITATION NO.2025:MPHC-IND:23825
09. In support of the above submissions learned Senior Counsel
placed reliance on various judgments of the Apex Court in Chetna
Polycoats (P) Ltd. v/s CCE reported in [1988] 37 E.L.T. 253
(Tribunal), Atul Glass Industries Pvt. Ltd. v/s CCE reported in [1986]
63 STC 322 (SC), Delhi Cloth & General Mills Co. Ltd. v/s State of
Rajasthan reported in [1980] 46 STC 256 (SC), Indo International
Industries v/s CST reported in [1981] 2 SCC 528 and Mauri Yeast
India Pvt. Ltd. v/s State of U.P. reported in [2008] 14 VST 259 (SC).
Reliance has further been placed on the judgments of various High
Courts in Castrol India Ltd. v/s CCT reported in [2018] 51 GSTR 40
(MP), Mega Enterprises v/s State of M.P. reported in [2012] 53 VST
422 (MP), Ruchi Soya Industries Ltd. v/s State of M.P. reported in
[2025] 140 GSTR 520 (MP), Excise & Taxation Officer v/s T.R.
Solvent Oil Pvt. Ltd. reported in [2011] 39 VST 387 (P&H) and
Lazarus Alosious v/s State of Kerala reported in [2006] 144 STC 210
(FB) (Ker).
10. Learned Senior Counsel has also relied upon various
determinations of different authorities which have held products of
similar description to be classifiable as "insulators" rather than under
any residuary or general entry in following cases the Advance Ruling by
Karnataka AAR reported in [2019] SCC Online Kar AAR -GST 61; and
DDQ orders passed by the Commissioners of Assam and Delhi in the
cases of M/s Anchor Electricals Pvt. Ltd; by the Commissioner of Delhi
in the case of M/s Gupta Plastic Works; by the Commissioner of
Karnataka in the case of M/s Alankar Electricals and by the
Commissioner at Chennai in the case of M/s Tvl. Everest Enterprises.
SUBMISSIONS OF RESPONDENT / STATE
NEUTRAL CITATION NO.2025:MPHC-IND:23825
11. Shri Sudeep Bhargava, learned Deputy Advocate General,
appearing on behalf of the respondents, submitted that the present
writ petition is misconceived and liable to be dismissed as the
impugned classification order passed by the Commissioner is legal,
proper and in accordance with the provisions of the M.P. VAT Act,
2002. Learned Deputy Advocate General submitted that the central
issue in the present matter is whether the product "Steel Grip
Insulating Tape" is liable to be taxed as an "insulator" under Entry 50
of Part - II of Schedule - II, as being relied upon by the petitioner.
12. Learned Deputy Advocate General submitted that the reliance
placed by the petitioner on judgment rendered in the context of the
Central Excise Act, such as Chetana Industries Ltd. v. Collector of
Central Excise, is totally misplaced as the legal and conceptual
framework of the levy of tax under Central Excise is fundamentally
different from that of VAT. Central Excise is a levy on the manufacture
or production of goods and is guided by HSN classifications, while VAT
is a levy on the point of sale.
13. Learned Deputy Advocate General submitted that Entry No. 50
of Part - II of Schedule - II relates specifically and exclusively to
"insulators" and not to insulating materials generally. In commercial
parlance, insulators are distinct goods sold by specialized dealers,
whereas insulating materials, including electrical tapes, are commonly
sold by general electrical goods dealers.
14. Learned Deputy Advocate General submitted that for the
purpose of classification under taxing statutes such as the VAT Act, the
test of common parlance must prevail over technical definitions and the
classification must be determined by their popular or commercial
NEUTRAL CITATION NO.2025:MPHC-IND:23825
understanding rather than any scientific or technical meaning. In the
present case, the product is a material used in electrical works and is
commonly understood and sold as such and is not interchangeable with
electrical insulators, which are a distinct commodity.
15. Learned Deputy Advocate General submitted definitions from
sources such as Wikipedia and legal lexicons, also indicating that while
insulators refer to devices or articles which prevent the passage of
electric current, tapes merely serve as accessories or covering material
and do not fall within the primary meaning of an "insulator". Learned
Deputy A.G. thus submitted that the Commissioner of Commercial Tax
has rightly classified the product under the residuary entry in Part - IV
of Schedule - II taxable @ 12.5% or 13% and prayed for dismissal of
the petition.
16. In support of the above submissions Learned Deputy Advocate
General placed reliance on several judgments of the Apex Court and
various High Courts in the cases of Commissioner of Trade Tax, U.P.
v/s S/S Parikh Gramodyog Sansthan in Civil Appeal No. 651/2005,
Ministry of Finance v/s W.S. Insulators of India reported in 1983 ELT
2184 (Mad), Indo International Industries v/s CST reported in [1981]
2 SCC 528, Ramavatar Bhudhaiprasad v/s Assistant Sales Tax Officer,
Akola reported in (1961) 1 SCR 1325 and Commissioner of Sales Tax,
M.P. v/s Jaswant Singh Charan Singh reported in (1967) 2 SCR 720.
APPRECIATION & CONCLUSION
17. Insulation tape is both an insulator and an adhesive tape. Its
primary purpose is to insulate electrical wires and other conductive
materials to prevent electrical current from escaping. While it
functions as a regular adhesive tape by sticking to surfaces, its key
NEUTRAL CITATION NO.2025:MPHC-IND:23825
characteristic is its non-conductive material, which sets it apart from
simple adhesive tapes like Scotch tape or duct tape.
Key Properties & Composition
18. Insulation tape is specifically engineered for electrical safety.
It's typically made from materials with very low electrical
conductivity, most commonly Polyvinyl Chloride (PVC). The PVC
backing provides excellent dielectric strength, which is its ability to
resist the flow of electricity, and makes it flexible and conformable to
wrap tightly around wires and connections.
19. The adhesive on the tape is also formulated to be non-
corrosive and to maintain a strong hold over time, even in various
environmental conditions like moisture and temperature changes.
How It's Different from Other Tapes
20. While most adhesive tapes have some degree of insulating
properties, they are not designed or tested for electrical applications.
Using a simple adhesive tape on an electrical wire can be a serious
fire and shock hazard because:
* Low Dielectric Strength: They don't have the same level of
electrical resistance as proper insulation tape.
* Flammability: Many common tapes, like duct tape, have
cloth or other flammable components that can easily catch fire under
high voltage.
* Durability: They can degrade quickly, losing their adhesive
properties and exposing the wire.
21. Insulation tape, on the other hand, is built to be flame-
retardant and resistant to environmental factors, ensuring a safe and
long-lasting repair or insulation. Electricians use different colors of
NEUTRAL CITATION NO.2025:MPHC-IND:23825
insulation tape to indicate the wire's voltage level or phase, which is
another function simple adhesive tapes can't provide.
19. Admittedly, the main purpose of insulating tape is to insulate
electrical wires to prevent electric current from escaping. If no
adhesive is applied to one side of the tape, it would be very difficult
to insulate the open wire in order to prevent the shock. The main
purpose of the insulating tape is for safety. Ordinary adhesive tape
may not have the level of electrical resistance which is provided in
the insulation tape. The adhesive is applied only to give a grip to an
insulating tape, therefore, it cannot be said that insulating tape is an
ordinary tape or used for stationery or artwork purposes.
20. Learned Deputy Advocate General argued that as per Entry
50 Part - II Schedule - II of the M.P. VAT Act, the insulator is taxable
@ 5% which will not include insulating material. The insulators are
sold by the specific category of dealers while the insulating material,
which includes the insulating tape is sold by most of the dealers
selling the electrical goods, hence, they are liable to be taxed as per
Entry - 1, Part - IV, Schedule - II @ 12.5%.
21. As per the definition, an insulator is a material that resists the
flow of electric charge. These materials are used in electrical
equipment as an insulator. Its function is to support or separate
electrical conductors without allowing current through themselves.
Some materials, such as glass, paper or Teflon are very good
electrical conductors. Rubber-like polymers and most plastics can
serve as a safe insulator for low to moderate voltages.
22. Insulators are commonly used as a flexible coating on electric
wire and cable. The wires which touch each other will produce cross
NEUTRAL CITATION NO.2025:MPHC-IND:23825
connections, short circuits and fire hazards. Any wires which present
voltages higher than 60V can cause human shock and electrocution
hazards, which is why insulating coatings help to prevent all of these
problems. When two electric wires are connected by removing the
plastic coating, the electricians apply the insulating tape to cover the
open part of the wire in order to prevent shock or loss of electricity,
which is why they are called electrical tape or insulator tape. The
varieties of electrical tapes in different colours are available. The
electricians generally use black tape for insulation purposes and other
colours of tape are used to indicate the voltage level and phase of the
wire. The insulating tape has no other use except to insulate the open
wires.
23. According to the Apex Court, it is generally by its functional
character that a product is so identified. It is a matter of common
experience that the identity of an article is associated with its primary
function. Since Entry 50, Part - II Schedule - II of the M.P. VAT Act
is a specific entry for classification and levy of tax on an insulator, in
view of the settled legal position that if there is a specific entry, in
which commodity falls, then the classification under the general or
residual entry should be avoided. Even if the commodity in question
falls in both entries, then the entry beneficial or favourable to the
assessee should be applied.
24. In view of the above, the impugned order dated 31.08.2010
(Annexure-P/1) passed by the Commissioner of Commercial Tax,
Madhya Pradesh, Indore, whereby the steel grip insulating tape has
been classified in the residual entry (in Entry No.1, Part - IV
Schedule - II of M.P. VAT Act) is hereby set aside. The steel grip
NEUTRAL CITATION NO.2025:MPHC-IND:23825
insulating tape manufactured by the petitioner is an insulator and
liable to be taxed under Entry 50 Part - II Schedule - II of the M.P.
VAT Act @ 5%.
25. With the aforesaid, Writ Petition stands allowed. No order as
to costs.
(VIVEK RUSIA) (BINOD KUMAR DWIVEDI)
JUDGE JUDGE
Ravi
