Processed cotton fabric may remain cotton fabric despite specialised use, but not necessarily a textile exemption.

Collar stiffening material was not treated as a textile exempt under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act because the processing altered the cloth beyond a mere textile article. However, it was held to remain a cotton fabric within section 14(iia) of the Central Sales Tax Act read with item 19 of the First Schedule to the Central Excises and Salt Act, since it was manufactured from cotton and did not lose that character merely because it was adapted for specialised use. The assessee succeeded on the central sales tax issue, and the matter was remitted for fresh consideration of the tax consequence.

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Issues: (i) Whether collar stiffening material was covered by item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act as a variety of textile exempt from tax. (ii) Whether the same material was cotton fabric falling within section 14(iia) of the Central Sales Tax Act read with item 19 of the First Schedule to the Central Excises and Salt Act, 1944.

Issue (i): Whether collar stiffening material was covered by item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act as a variety of textile exempt from tax.

Analysis: The expression "textiles" in the relevant schedule was understood as cloth or fabric made by weaving, knitting, netting or braiding, and the essence of the entry was the existence of textile material as such. Once a manufacturing operation substantially changes the cloth, it may cease to answer that description. The collar stiffening material was a cut piece of cloth with added processing and was not treated as merely a textile article within the schedule.

Conclusion: The material was not exempt under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act.

Issue (ii): Whether the same material was cotton fabric falling within section 14(iia) of the Central Sales Tax Act read with item 19 of the First Schedule to the Central Excises and Salt Act, 1944.

Analysis: For the purpose of section 14(iia), the relevant enquiry was whether the product was a fabric manufactured wholly or partly from cotton. The material was prepared out of cotton and remained a manufactured cotton fabric notwithstanding the processing applied to it. No basis was found for excluding it from the category of cotton fabrics merely because it had been processed for use as collar stiffening material.

Conclusion: The material fell within section 14(iia) of the Central Sales Tax Act and was not liable to be taxed under the Tamil Nadu General Sales Tax Act on that footing.

Final Conclusion: The assessee succeeded on the central sales tax issue, but the matter was sent back for fresh consideration on the effect of that conclusion.

Ratio Decidendi: A processed cotton article does not cease to be a cotton fabric for the purpose of section 14(iia) of the Central Sales Tax Act merely because it is adapted for a specialised use, if it remains a manufactured fabric made wholly or partly from cotton.

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