Cotton fabrics exemption preserved where cutting and stitching alone do not create a new product.

Bed-sheets, bed-spreads, towels and napkins made from cotton cloth by cutting the fabric into lengths and stitching the ends remained cotton fabrics for exemption purposes. The decisive test was whether the processing altered the essential nature and character of the material or created a new product; mere cutting and stitching, without dyeing, printing, embroidery or similar further work, did not do so. As the statutory scheme treated cotton fabrics and allied finished articles as within the relevant entry, the taxing authorities were incorrect to exclude these goods from exemption under the Bengal Sales Tax Rules.

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Issues: Whether bed-sheets, bed-spreads, towels and napkins made from cotton fabrics by cutting the cloth into lengths and stitching the ends continued to be "cotton fabrics" for the purpose of exemption under rule 3(28) of the Bengal Sales Tax Rules read with section 5(2)(a)(vi) of the Bengal Finance (Sales Tax) Act, 1941.

Analysis: Entry 19 of Schedule I to the Central Excises and Salt Act, 1944 expressly included cotton fabrics and also specifically mentioned bed-sheets, bed-spreads and allied articles. The decisive inquiry was whether the process applied had altered the essential nature and character of the fabric so as to bring a new product into existence. Mere cutting of running cloth into smaller lengths and stitching the ends, without dyeing, printing, embroidery or any other superimposed work, did not by itself change the essential character of the material. The articles remained cotton fabrics in their ordinary and accepted sense, and the taxing authorities had erred in treating them as outside the exempted category without applying the correct legal test.

Conclusion: The stitched bed-sheets, bed-spreads, towels and napkins remained cotton fabrics and were entitled to exemption under rule 3(28) of the Bengal Sales Tax Rules.

Ratio Decidendi: Where a statutory definition of cotton fabrics includes specific finished articles, a process that merely facilitates their completion by cutting and stitching, without altering their essential nature and character or creating a new product, does not take them outside the exemption.

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