Blue Chip Felt Vs Commercial Tax (Madhya Pradesh High Court)
Madhya Pradesh High Court heard a batch of VAT appeals challenging common orders dated 29.12.2021 passed by the M.P. Commercial Tax Appellate Board, which had upheld assessments classifying “Woollen Felt Components” as machinery parts taxable at a higher rate. The appellants, partnership firms engaged in manufacturing felt components tailored for industrial machinery, contended that felt is a textile/fabric and should be taxed under the lower-rate fabric entries of the MP VAT Act, 2000. Initially, for certain years, the goods were assessed as fabric at 4%, but assessments were later reopened on audit objections and reclassified as machinery parts taxable at 12.5%–13%. Appeals before the first appellate authority and the Appellate Board were dismissed.
Before the High Court, the appellants raised multiple questions of law, including improper reliance on nomenclature, failure to consider the essential characteristics of felt, incorrect application of the residuary entry, reliance on decisions under previous tax regimes, and the legality of reopening assessments based solely on audit objections. The appellants argued that felt is a textile structure made of interlocked fibres, relied on dictionary meanings, and cited Supreme Court precedents to contend that specific tariff entries should prevail over residuary entries.
