2025-VIL-903-MP
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VAT High Court Cases

Madhya Pradesh VAT Act - Classification of felt components - Appellants are manufacturers of felt components that are used as machinery parts in industries. The appellants claimed that the felt components should be classified as 'fabric' under Schedule II Part II and taxed at a lower rate of 4-5%, while the tax authorities classified them as 'machinery parts' under Schedule II Part IV and levied a higher tax rate of 12.5-13% - Whether the felt components should be classified as 'fabric' under Schedule II Part II or as 'machinery parts' under Schedule II Part IV of the MPVAT Act – HELD - The felt components are primarily used as machinery parts in industries and not as fabrics for manufacturing items like towels, bed covers, etc. The 'common parlance/popular test' and the use of the product in the industry to determinative to its classification. The judgment relied upon by the appellants in the case of Porritts & Spencer distinguishable on the grounds that the specific entries in the MP VAT Act are different from the generalized entries in the Punjab General Sales Tax Act considered in that case. Accordingly, felt components are rightly classified as 'machinery parts' under the residuary entry in Schedule II Part IV and are liable to be taxed at the higher rate of 12.5-13% - The orders of the tax authorities classifying the felt components as 'machinery parts' were upheld and the appeals filed by the appellants are dismissed
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