Post-manufacture embroidery on cotton fabric shifts products from exemption to specific or residuary tax entries.

Embroidery superimposed after manufacture on cotton pieces took the finished sarees out of the category of mere cotton fabrics, so the specific taxing entry for embroidered sarees applied and the general cotton-fabric exemption did not. The same principle applied to a three-yard embroidered cloth intended for ladies' underwear: it was not a ready-made garment or an article prepared for immediate use, and no specific concessional entry covered it, so the residuary entry applied. The references were answered in favour of the State, with both products treated as taxable under the relevant entries of Schedule E.

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Issues: (i) Whether embroidered sarees made by superimposing embroidery on five-yard cotton pieces after manufacture was complete were exempt as cotton fabrics under entry 15 of Schedule A to the Bombay Sales Tax Act, 1959, or were taxable under entry 3 of Schedule E. (ii) Whether the three-yard embroidered cloth meant for ladies' underwear fell under entry 4 of Schedule D as a ready-made garment or article prepared from cotton fabric, or under the residuary entry 22 of Schedule E.

Issue (i): Whether embroidered sarees made by superimposing embroidery on five-yard cotton pieces after manufacture was complete were exempt as cotton fabrics under entry 15 of Schedule A to the Bombay Sales Tax Act, 1959, or were taxable under entry 3 of Schedule E.

Analysis: Cotton pieces cut from malmal or voil remained cotton fabrics in their basic form, but once embroidery was superimposed after the manufacturing process was complete, the articles ceased to be mere cotton fabrics within item 19 of the First Schedule to the Central Excises and Salt Act, 1944. The embroidery was not incidental or ancillary to manufacture within section 2(f) of that Act. Entry 3 of Schedule E specifically dealt with embroidered or decorated sarees, and the explanation to that entry showed a legislative distinction between decoration during weaving and decoration after manufacture. A specific entry prevailed over the general exemption in entry 15 of Schedule A.

Conclusion: The embroidered sarees were not exempt cotton fabrics under entry 15 of Schedule A. They were taxable under entry 3 of Schedule E, and the answer was against the assessee.

Issue (ii): Whether the three-yard embroidered cloth meant for ladies' underwear fell under entry 4 of Schedule D as a ready-made garment or article prepared from cotton fabric, or under the residuary entry 22 of Schedule E.

Analysis: The three-yard piece was not a ready-made garment because further stitching was needed to make it into underwear, and it was not an article prepared and made ready for immediate use. For the same reason that embroidery superimposed after manufacture took the article out of the category of cotton fabrics, entry 4 of Schedule D, which presupposed an article prepared from cotton fabrics, did not apply. No other specific entry covered it.

Conclusion: The three-yard embroidered cloth was not covered by entry 4 of Schedule D and fell under the residuary entry 22 of Schedule E. The answer was against the assessee.

Final Conclusion: The references were decided in favour of the State, with the embroidered sarees and the embroidered three-yard cloth held taxable under the appropriate entries of Schedule E rather than under the exemption or concessional entries claimed by the assessees.

Ratio Decidendi: Where embroidery is superimposed after the manufacture of cotton fabric is complete, the resulting article is no longer a mere cotton fabric for exemption purposes, and a specific taxing entry for the finished embroidered article prevails over a general exemption or concessional entry.

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