Broad definition of cotton fabrics extends sales tax exemption to marketable mill-made handkerchiefs.

Mill-made handkerchiefs were treated as cotton fabrics for sales tax exemption because the statutory term "fabric" was read broadly enough to cover a handkerchief woven to size or cut from a larger textile. The decisive consideration was whether the article remained a distinct, marketable commercial commodity recognised in trade as a handkerchief. On that basis, handkerchiefs falling within the statutory definition of cotton fabrics qualified for exemption under the Tamil Nadu General Sales Tax Act, 1959.

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Issues: Whether mill-made handkerchiefs sold by the assessee are exempt from sales tax as cotton fabrics under section 8 read with item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.

Analysis: Item 4 of the Third Schedule exempts cotton fabrics as defined in item 19 of the First Schedule to the Central Excises and Salt Act, 1944. The expression "fabric" was held to be wide enough to include a handkerchief woven to size as well as a handkerchief cut to size from a larger fabric. The decisive consideration was whether the article is a marketable commercial commodity distinct from the larger textile from which it may be cut. Mill-made handkerchiefs were treated as recognised handkerchiefs in trade and therefore as cotton fabrics for exemption purposes.

Conclusion: The assessee was entitled to exemption, and the revision by the State Government failed.

Ratio Decidendi: A commercially marketable handkerchief, whether woven to size or cut from a larger fabric, falls within the exemption for cotton fabrics where the statutory definition of fabric is sufficiently wide.

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