http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

PETITIONER: FILTRCO & ANR.

       Vs.

RESPONDENT: COMMISSIONER OF SALES TAX,MADHYA PRADESH AND ANR.

DATE OF JUDGMENT11/02/1986

BENCH: ERADI, V. BALAKRISHNA (J) BENCH: ERADI, V. BALAKRISHNA (J) REDDY, O. CHINNAPPA (J) VENKATARAMIAH, E.S. (J) MISRA, R.B. (J) KHALID, V. (J)

CITATION:  1986 AIR  626            1986 SCR  (1) 239  1986 SCC  (2) 103        1986 SCALE  (1)171

ACT:      Constitution of India - Article 226 and 227 whether the High Court  can dismiss  a petition in limine on the plea of the existence  of an alternate remedy open to the petitioner Construction of  a  taxing  statute  -  The  Madhya  Pradesh General Sales  Tax Act,  1958 -  Exemption under section 10- Whether "Compressed  Woollen Felts" constitute "cloth" so as to fall  within the  scope of  Entry 6  of Schedule I of the 1958 Act  Principle of equitable Estoppel, applicability of- Opinion given  earlier on  the basis of only one specimen of the felt  that it  is "cloth"  (when in  fact  the  assessee manufactures 26  varieties) and  non recovery of tax on that score for twelve years - Principle cannot be attracted.

HEADNOTE:      The appellants  M/s. Filtereo  manufactures  compressed felt by subjecting the Compressed woollen fibres to heat and moisture. On   March 25, 1971 they addressed a communication to the  Commissioner of  Sales Tax  forwarding a specimen of the felt  manufactured in  their factory and requesting that the same  may be treated as exempt from tax under Entry 6 of Schedule I  to the  Madhya Pradesh  General Sales  Tax  Act, 1958. This request-was acceded to through the Commissioner’s letter dated  7.8.1971. On  the basis of the said letter the turnover  of   the  company   pertaining  to  the  sales  of compressed woollen  felt was not subjected to the during the period from  1971 to  1982. However,  be a letter dated 4.3. 1982 the  Commissioner of  Sales The informed the appellants that "in  view of  the Judgment  of the Supreme Court in the case of  M/s. Gujarat Woollen Mills, (A.I.R. 1977-1548 S.C.) that compressed woollen felts are not "woollen fabrics", its earlier  opinion   dt.  7.8.71  to  the  contrary  that  the Compressed Woollen  Felt manufactured  by appellant  will be except under  Entry 6  of Schedule  I of  the Sales Tax Act, 1958 be treated as cancelled. Aggrieved by the 240 revised stand  taken by  the Commissioner  of Sales Tax, the appellants filed  an application  before the Commissioner of Sales Tax  under section  42B of the Act for a determination

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

of the  question of  taxability of  the goods in question by producing as many as 26 samples of felt of varying hardness, density and  thickness alongwith a statement showing details of each  sample. The  Commissioner of  Sales Tax  was of the view that  though the  expression "cloth"  will take in non- wovan  material   inclusive  of  "felt",  pliability  is  an essential attribute  of "cloth"  and only those varieties of felt manufactured  by the  appellants which satisfy the test of pliability  can be legitimately classified as "cloth" and applying the  said test,  by his  order dated  25.1.83, held that only  5  out  of  the  26  specimens  produced  by  the appellants namely,  those marked by the Commissioner as A-1, A-2, A-3,  A-4 and  A-19 could  be classified as "cloth" and granted exemption  from tax  under Entry  6 of Schedule I of the Act. The remaining 21 samples attracted tax liability at the rate of ten per cent.      The appellants  filed a Writ Petition in the High Court of Madhya  Pradesh challenging  the aforesaid  order but the High Court dismissed the Writ Petition without entering into merits by  observing that  there  was  an  alternate  remedy available to the petitioners under the Act. Hence the appeal by special leave.      Dismissing the appeal, the Court, ^      HELD :  1. A  summary dismissal of the Writ Petition on the  specious  plea  of  availability  of  alternate  remedy without considering  and pronouncing  upon the merits of the contentions raised  by the  parties, in  this case,  is  not justified, in as much as (a) the order passed by the Commis- sioner of  Sales Tax  was clearly  binding on  the assessing authority under  section 42B(2); (b) although technically it would have  been  open  to  the  appallants  to  urge  their contentions before the appellate authoring , that would be a mere exercise  in futility  when a  superior officer namely, the Commissioner, has already passed a well considered order in the  exercise of  his statutory  jurisdiction under  sub- section (1)  of section  42-B of  the Act  holding  that  21 varieties of the compressed woollen felt manufactured by the appellants are  not eligible  for exemption under Entry 6 of Schedule I of the Act; and (c) a substantial 241 portlon of  the tas  has to be deposited before an appeal or revision can  be flled  as required  by seetion 38(3) of the Act. [ 246 C-H; 247 A]      2. The legal position is now well settled that words of everyday  use   occurring  in  a  dashing  statute  nust  be construed not  ia thelr scientific or technical sense but as understood in  common parlance  that  is  in  their  popular sense. [ 247 C-Dl      In order  to attract the benefit of exemption conferred by Entry  6 of  Schedule I  of the  Act the  goods must fall within the  description "all  varieties of  cloth". Going by the  meanlng  glven  in  Dictionaries  as  well  as  by  its generally accepted  popular  ConnotatiQn  "cloth"  is  woven knitted or  felted material  which is pliable and is capable of being  wrapped  folded  or  wound  around.  It  need  not necessarlly be uaterlal w ltable for maklng garments because there can  be "cloth"  sultable oaly for industrial purposes but nevertheless  it  must  possess  the  basic  feature  of pliability. Hard  and thlck material which csnnot be wrapped or wound  around cannot  be regarded  as "cloth".  Therefore only those  varieties of felt manufactured by the appellahts which satisfy  the test of pliablllq will constitute "cloth" so as  to fall  within the scope of Entry 6 of Schedule I of the Act. [247 A-B; C-G 248 D-E]

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

    Grenfell v.  Inland Revenue  Commissioners [1876] 1 Ex. D. 242 at 248; 200 Cheata of Tea [1824] 9 Wheaton (U.S.) 430 at 438;  Motipur Zselodsry Co. Ltt. v. State of Bihar [1962] 13 S.T.C. 1 S.C.; State of West Bengal v. Washi Ahmed [1977] 39 S.T.C. 378 S.C. referred to.      Porritts snd  Spenoer (Aais)  Ltd. v.  State of Haryana [1978] 42  S.T.C. 433  S.C. and  Union of  India and Ors. v. Gujrat Woollen  Felt Mills [1977] 3 S.C.R. 472 esplalnet and distingushed.      3. The princlple of equltable estoppel is not attractet in the  instant case in as much as only one specimen of felt had been  forwarded by the appellants to the Commissioner of Sales Tax along wlth thelr letter tited March 25 1971 ant lt was only  ln relation  to thaL  single specinen of felt that the Commissioner  had expressed  the view that it was exempt under Entry 6 of Schedule I of lts letter dated 242 August 7,  1971, while froo the saoples protuced later on it was found  that the  appellants are rsnufacturing as many as 26 tifferent varieties of coopresset woollen felt of varying hardness, density  and thickness  out of  which only  5 were eligible for exeoption. [249 E-H; 250 A-B]

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8548 of 1983.      From the  Judgment &  Order dated 31.3.83 of the Madhya Pradesh High Court in Misc. Petition No. 298 of 1983.      P. Govindan Nair, S.K. Gambhir for the Appellants.      A.K. Sanghi for the Respondents.      The Judgment of the Court wa3 delivered by      BALAKRISHNA  ERADI,   J.  The   short  but  interesting question that arises for our consideration in this appeal by special  leave  is  whether  the  Compressed  Woollen  Felts manufactured  in   the  samll-scale  industry  unit  of  the appellants can  be said  to constitute "cloth" so as to fall within the  scope of  Entry 6  of Schedule  I of  the Madhya Pradesh General  Sales Tax  Act, 1958 (for short ’the Act’), which is in the following terms:-           "All varieties  of Cloth  manufactured in mills or           on powerlooms  or  handlooms  including  processed           cloth, but  excluding hessian  cloth" -  so as  to           eligible for  exemption of sales tax under Section           lO of the said Act.      The process  of manufacture  of ’felt’  adopted in  the appellants’ factory  has been  described in the order of the Coroissioner of  Sales Tax  dated January  25, 1983. the raw material  consisting   of  woollen  fibres  is  first  mixed thoroughly and thereafter carded on a carding machine, which process results  in the  laying of  the fibres  in a  combed condition in  a uniform  direction. me  combed fibres in the shape of  a web  layer are  then subjected to the process of hardening in  a machine  having  an  eccentric  motion;  the carded webs  &re put  through two layers of cloth and passed through a  steam chest.  m is  results in the web/wool layer being converted  in the  form of  a  sheet,  which  is  then subjected to 243 the process  of milling  to impart  to it  necessary tensile strength and  shrinkage. For  this purpose, the sheet is put in a  machine, which has two rows of contra-rotating rollers to provlde  the necessary  felting action  to the sheet. The sheets run  in the  machine till  the desired  shrinkage and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

density are  achleved. After  this the  sheet is  dried  and trimmed at  the ends and thereafter subjected to the process of calendering  and for  this purpose  it is  passed through steam heated contrarotating rollers. me resultant product is ’felt’.      From the above description it is clear that the woollen felt manufactured  by the  appellants is a material obtained by compressing  woollen fibres  and subjecting  the same  to heat and moisture. It is a non-woven material.      On  March   25,  1971,   the  appellants   addressed  a communicatlon to  the Commissioner of Sales Tax forwarding a specimen of  the felt  manufactured  in  their  factory  and requesting that  the same  may be treated as exempt from tax under Entry 6 of Schedule I.      In reply thereto the Commissioner of Sales Tax sent the following communication (Annexure I) to the appellants:-      "OFFICE OF THE SALES TAX COMMISSIONER MADHYA PRADESH      NO.Wick/F/32/71/12317       Indore, dated 7.8.1971           To           Filterco           Garden 51,           Neemuch (Madhya Pradesh).           Sir,  With   reference  to   your   letter   dated           25.3.1971, it  is stated  thae  specimen  of  felt           submitted by  you, being woollen fabric, is exempt           under M.P.  General Sales  Tax  Act,  1958,  under           Entry 6 of its Schedule I.                                       Yours faithfully,                                                  Sd/-                                          (N.K. PILLAI)                                 Additional Commissioner                          for Commissioner of Sales Tax                                       Madhya Pradesh". 244      It is common ground that apparently on the basis of the said letter  of the  Commissioner of Sales Tax, the turnover of the  appellants pertsining  to the  sales  of  compressed woollen felt was not subjected to tax during the period from 1971 to 1982.      While matters  stood thus,  the Commissioner  of  Sales Tax, Madhya  Pradesh issued  the following  letter (Annexure II) to the appellants on March 4, 1982:-         "OFFICE OF THE COMMISSIONER SALES TAX MADHYA PRADESH       No.ST/I-310/24(b)79/2872     Indore. dt. 4.3.1982           To           M/s Filterco,           Garden 51,           Neemuch (MP)           Sub:- Lew of sales tax on compressed woollen Felt.           In view of the judgment given by the Supreme Court           in the  case of M/s Gujarat Woollen Mills (A.I.R.-           1977-1548 SC)  that the  compressed woollen  felts           are not "woollen fabrics", Compressed Woollen Felt           manufactured by you will not be exempt under entry           6 of  Schedule I  of the  M.P. General  Sales Act,           1958 but  will be covered under entry 1 of Part VI           of Schedule  II appended to the said Act, and will           attract tax @ 10%.           Clarification given  to you  in this office letter           No.I/26/32/71-12317,  dated   7.8.1971  is  hereby           cancelled.                                      Yours faithfully,                                                   Sd/-                           Asstt. Commissioner (Tech)                          for Commissioner of Sales Tax

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

                                     Madhya Pradesh." 245      Feeling aggrieved  by the  revised stand  taken by  the Commissioner of  Sales Tax that the felt manufactured in the appellants factory  is not  eliglble for  exemption and will attract tax  at lO%,  the appellants  filed  an  application before the  Commissioner of  Sales Tax under Section 42-B of the Act for a determination of the question of taxability of the goods  in question.  Section 42-B  is in  the  following terms:-           "Section 42-B. Deter in tion of diaputed question           1. If  any question  is  raised  by  a  dealer  in           respect of  the rate  o tax  on  any  goods,  the           Commissioner  shall,   in  accordance   with  such           procedure as  may be  prescribed,  make  an  order           determining the rate of tax on such goods.           2. Any  order passed  by  the  Commissioner  under           subsection (1) shall be binding on the authorities           referred to  in Section 3 in all proceedings under           the Act except appeals."      The appellants produced before the Commissioner as many as 26  samples of  felt of  varying  hardness,  density  and thickness along  with a  statement showing  details of  each sample. After  affording full hearing to the appellants, the Commissioner of  Sales Tax passed an order dated January 25, 1983 expressing  the view that though the expression "cloth" will  take   in  non-woven  material  inclusive  of  ’felt’, pliability is  an essentlal  attribute of  "cloth" and  only those varieties of felt manufactured by the appellants which satisfy  the-test   of  pliability   can   be   legitimately classified  as   "cloth".  Applying   the  said   test,  the Commissioner held  that only  5  out  of  the  26  specimens produced by  the appellants namely, those marked by the Co d ssioner as  A-1, A-2,  A-3, A-4 and A-19 could be classified as "cloth"  and granted  exemption from tax under Entry 6 of Schedule I  of the  Act and  that the  remaining 21  samples would not  fall within  the scope of the said entrY and are, therefore, taxable at the rate of lO%.      The appellants  filed a Writ Petition in the High Court of Madhya  Pradesh challenging the aforesaid order passed by the Commissioner in so far as it went against them. The High Court dismissed  the Writ Petition without entering into the merits by stating thus:- 246           "It is  not the  case of  the petitioners  that in           passing  the  impugned  order,  the  Commissioner,           therefore has acted contrary to the procedure pres           cribed by  the Act  or the  Rules made thereunder.           The petitioners having referred the dispute to the           Commissioner, he  had  jurisdiction  to  pass  the           impugned order.  At this  stage, we  refrain  from           expressing any  opinion regarding  the correctness           of the impugned order because that order would not           be binding  on the appellate authorities under the           Act, which  would, no  doubt, examine the question           afresh if  raised before  them by the petitioners.           If the  petitioners are  aggrieved by the decision           of the  appellate authorities, a reference to this           Court under  Section 44 of the Act can be made. As           a remedy is available to the petitioners under the           Act, it  is not  necessary to invoke the extraorti           nary powers  of this  Court under Articles 226 and           227 of the Constitution of India." Aggrieved by  the  said  decision  of  the  High  Court  the appellants have  filed this  appeal after  obtaining special

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

leave.      We are  of opinion  that the  High  Court  should  have examined the  merits of  the case  instead of dismissing the Writ Petition in limine in the manner it has done. The order passed by  the Commissioner of Sales Tax was clearly binding ol the assessing authority under Section 42B(2) and although technically it  would have  been open  to the  appellants to urge  their   contentions  before  the  appellate  authority namely, the  Appellate Assistant Commissioner, that would be a mere  exercise in futility when a superior officer namely, the Commissioner, has already passed a well considered order in the  exercise of  his statutory  jurisdlction under  sub- section (1)  of Section  42-B of  the Act  holding  that  21 varieties of the compressed woollen felt manufactured by the appellants are  not eligible  for exemption under Entry 6 of Schedule I  of the  Act. Further  Section 38(3)  of the  Act requires that  a substantial  portion of  the tax  has to be deposited before an appeal or revision can be filed. In such circumstances we  consider that the High Court ought to have considered and pronounced upon the merits 247 of the  contentions raised  by the  parties and  the summary dismissal of  the Writ Petition was not justified. In such a situation, although we would have, ordinarily, set aside the judgment of  the High  Court and  remitted the  case to that Court for  fresh disposal,  we consider  that in the present case it  would be in the interests of both sides to have the matter finally  decided by  th.is Court at the present stage itself especially since we have had the benefit of elaborate and learned  arguments addressed by the counsel appearing on both sides.      In order  to  attract  the  benefit  of  the  exemption conferred by  Entry 6  of Schedule  I of  the Act, the goods must fall  within the  description "all varieties of cloth". The legal  position  is  now  well  settled  that  words  of everyday use occurring in a taxing statute must be construed not in their scientific or technical sense but as understood in common  parlance, that  is, in  their "popular sense". As succinctly stated  by Pollock,  B., in  Grenfell  v.  Inland Revenue Commissioners,  [1876] 1  Ex.D. 242  at 248,  "if  a statute  contains   language  which   is  capable  of  being construed in  a popular sense, such ’ a statute is not to be construed according  to the  strict or  technical meaning of the language  contained in it, but is to be construed in its popular sense,  meaning of  course, by  the  words  "popular sense", that sense which people conversant with the subject- matter with  which the statute is dealing would attribute to it"’.  The  same  principle  was  expressed  in  a  slightly different language by Story J., in 200 Chests of Tea, [1824] 9 Wheaton  (U.S.) 430  at 438,  where the learned Judge said that "the  particular words  used by  the legislature in the denomination of  articles are  to be understood according to the common  commercial understanding  of the terms used, and not  in  their  scientific  or  technical  sense,  ’for  the legislature  does   not  suppose   our   merchants   to   be naturalists, or  geologists, or  botanists"’. m is Court has reiterated the  said position  in Motipur  Zamindary Company Ltd. v. State  of Bihar, (1962) 13 S.T.C. 1 (S.C.), State of West Bengal  v. Washi Abmed, (1977) 39 S.T.C. 378 (S.C.) and Porrltts and Spencer (Aala) Ltd, v. State of Hhryana, (1978) 42 S.T.C. 433 (S.C.).      According to Oxford English Dictionary - "cloth means- 248           "A  piece   of  pliable  woven  or  felted  stuff,           suitable for wrapping or winding around, spreading

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

         or folding  over, drying, wiping or other purpose;           a swaddling  or  winding  cloth,  wrap,  covering,           veil, curtain, handkerchief, towel etc." . . . . .                                      (underlining ours)      In Webfiter’s  New International  Dictionary "cloth" is stated to mean:-           "A pliable  fabric, woven,  felted or knitted from           any filament,  commonly fabric  or  woven  cotton,           woollen, silk,  rayon or  linen fabric,  used  for           garments etc.                                      (underlining ours)      Going by  the meaning  given in Dictionaries as well as by its  generally accepted  popular connotation  "cloth"  is woven, knitted  or felted  material which  is pliable and is capable of  being wrapped,  folded or  wound around. It need not necessarily  be material  suitable for  making  garments because there  can be  "cloth" suitable  only for industrial purpose; but  nevertheless it must possess the basic feature of pliability.  Hard and  thick  material  which  cannot  be wrapped or  wound around  cannotbe regarded  as "cloth".  We are,  therefore,   of  opinion  that  the  Commissioner  was perfectly right  in his  view that  only those  varieties of felt manufactured  by the  appellants which satisfy the test of pliability  will constitute  "cloth" so as to fall within the scope of Entry 6 of Schedule I of the Act.      Counsel for  the appellants  submitted before  us  that there is  a  conflict  between  this  Court’s  decisions  in Pbrritts aod Spencer (Asia) Ltd. v. State of Haryaos (supra) and the  earlier ruling  of this Court in Unioo of India and Ors. v.  Gujarat Woollen Felt Mills, [1977] 3 S.C.R. 472. We see no conflict at all between these two decisions. However, neither of  those rulings  is of  any assistance in deciding the present  case though  both of  them dealt  with  certain varieties of ’felt’. In the Gujarat Woollen Felt Mills case, the questlon  before this  Court was whether non-woven felts manufactured out  of woollen fibres by machine-pressing were "woollen fabrics"  for the  purpose of  levy of  excise duty under entry 21 in Schedule I to the Central Excises and Salt Act, 1944. It was 249 held  that  the  expression  "fabric"  took  in  only  woven material and  hence non-woven  felts  made  out  of  woollen fibers were not "woollen fabrics".      The question  that  arose  before  this  Court  in  the subsequent case  - Porritts And Spencer (Asia) Ltd. v. State of Haryana (supra) was wholly different. In that case it was contended that  ’dryer felts’  made out of cotton or woollen yarn by  the process  of weaving  according to  the wrap and woof pattern  and commonly used as absorbents of moisture in paper manufacturing  units  fell  within  the  ordinary  and common parlance  sense of  the word "textiles" in item 30 of Schedule to the Punjab General Sales Tax Act, 1948 and were, therefore, exempt  from tax.  Upholding the  said contention this  Court  held  that  expression  "textiles"  interpreted according to  its popular sense has only one meaning, namely a woven  fabric and  since the dryer felts were manufactured out of  cotton, woollen  or synthetic yarn by the process of weaving according  to the  wrap and  woof pattern, they were undoubtedly "textiles" within the meaning of that expression in item  30 of  Schedule B.  The subject  matter of the case before us  being admittedly  felt manufactured  by a totally different process and the wording of the Entry 6 in Schedule I of  the statute,  with which  we are  concerned being also wholly different,  these two  decisions are of no assistance to us.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

    Counsel appearing  on behalf  of the  appellants relied strongly on  the letter  of the  Commissioner of  Sales  Tax dated August  7, 1971  - Annexure  I and sought to invoke to the  principle   of  equitable  estoppel  as  debarring  the respondents from  contending that  the goods in question are ineligible for  the benefit  of the  exemption conferred  by Entry 6  of Schedule I. We do not find it possible to uphold this contention.  It is  seen from  the  appellants’  letter dated August  7, 1971,  which we  have extracted  above that only  one  specimen  of  felt  had  been  forwarded  by  the appellants to the Commissioner of Sales Tax along with their letter dated  March 25,  1971 and it was only in relation to that single  specimen of  felt  that  the  Commissioner  had expressed the  view that  it was  exempt under  Entry  6  of Schedule I.  From the  samples produced  in this  case it is found that  the appellants  are manufacturing  as many as 26 different varieties  of compressed  woollen felt  of varying hardness, density and thickness. There is absolutely no 250 material on  the record  to  show  which  out  of  these  26 varieties was  sent as specimen to the Commissioner in 1971. In these  circumstances the  principle of equitable estoppel is not attracted.      In the  light of the foregoing discussion, we hold that the view taken by the Commissioner of Sales Tax in his order dated January  25, 1983  is perfectly  legal and correct and the said order does not call for any interference.      However, before  we part  with the  case we may observe that having  regard to the fact that the appellants industry is one  in the  small-scale sector and the appellants appear to have  been lulled  into a  false sense of security by the impression gathered  by them  from the Commissioner’s letter dated August  7, 1971  that the ’felt’ manufactured in their factory is  not liable  to tax by reason of which impression the appellants  had desisted  from collecting  any sales tax from the  customers  during  the  period  between  1971  and January, 1983, this is a fit case where the State Government should sympathetically  consider the  question  whether  the whole or  at least  a substantial  portion of  the sales tax payable in  respect of  the turnover of the goods during the aforesaid period should not be waived for the sake of saving the  industry   from   financial   ruination.   With   these observations, we  dismiss this appeal but direct the parties to bear their respective costs. S.R.                                 Appeal dismissed. 251