Zari embroidery on silk was treated as a sale of finished goods, not a works contract or exempt textile.

Zari embroidery on silk cloth was treated as a sale of finished embroidered goods, not a works contract, because the articles were ready-made and there was no evidence that the customer supplied cloth for embroidery work. The textile exemption failed since the goods were not merely cloth after processing and the material was silk rather than cotton. Relief under the zari entry also failed because the transaction was for embroidered articles made with zari, not for zari as such. The result was taxable treatment of the finished products under the sales tax law.

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Issues: Whether zari embroidery work on silk cloth constituted a works contract or a sale of finished goods; whether the transaction was exempt as textile under item 4 of the Third Schedule to the Madras General Sales Tax Act, 1959; and whether it fell within the concessional treatment applicable to zari under item 19 of the First Schedule to the Madras General Sales Tax Act, 1959.

Analysis: The transaction was found to involve ready-made embroidered pieces sold as such, with no evidence that the customer supplied the cloth for the embroidery to be done. The value of the articles was driven substantially by the zari embroidery, and the cloth element had become trivial. On those findings, the transaction could not be treated as a contract for work and labour, but was a sale of finished embroidery products. The claim to textile exemption also failed because the goods were not merely cloth after embroidery, and the materials were silk rather than cotton. The plea based on the zari entry was rejected because what was sold was not zari as such, but embroidered articles made with zari on silk cloth.

Conclusion: The transaction was held to be a taxable sale of finished goods and not a works contract or exempt textile sale; the revision failed.

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