Cotton cord classification turned on retained identity of yarn, excluding fabric treatment and residuary tax rate.

A thin cotton cord made by intertwining, twisting and braiding cotton threads was not treated as cotton fabric, so it did not qualify for exemption on that basis under the Rajasthan Sales Tax Act, 1954. However, the cord retained the identity of cotton yarn despite being twisted, braided, coloured or bundled, and was therefore treated as declared goods under section 14 of the Central Sales Tax Act, 1956. As a result, the applicable State levy could not exceed the rate for declared goods, and the residuary rate was inapplicable.

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Issues: (i) Whether pachrangi dori was cotton fabric and therefore exempt from tax under the Rajasthan Sales Tax Act, 1954; (ii) whether pachrangi dori was cotton yarn declared goods under section 14 of the Central Sales Tax Act, 1956 and, if so, whether it was taxable at 2% instead of the residuary rate of 7%.

Issue (i): Whether pachrangi dori was cotton fabric and therefore exempt from tax under the Rajasthan Sales Tax Act, 1954.

Analysis: The commodity was a thin cord made by intertwining, twisting and braiding cotton threads. The Court held that the process did not make it cotton fabric. The authorities relied on by the assessee concerning braided cords, lace, tape and other textile articles did not establish that a cotton cord was fabric.

Conclusion: Pachrangi dori was not cotton fabric and was not exempt from tax on that basis.

Issue (ii): Whether pachrangi dori was cotton yarn declared goods under section 14 of the Central Sales Tax Act, 1956 and, if so, whether it was taxable at 2% instead of the residuary rate of 7%.

Analysis: Cotton yarn does not lose its identity merely because it is twisted, braided, coloured or bundled into a cord. The Court treated pachrangi dori as a cotton cord which still retained the character of cotton yarn. Since cotton yarn is declared goods, the State levy could not exceed the limit applicable to such goods and the residuary rate was inapplicable.

Conclusion: Pachrangi dori was cotton yarn, taxable at 2%, and not liable at the residuary rate of 7%.

Final Conclusion: The references were answered in favour of the Revenue on exemption but in favour of the assessee on classification and rate, and the Board's view was upheld.

Ratio Decidendi: Twisting, braiding or colouring of cotton yarn into a cord does not create a new commercial commodity if the yarn retains its identity, and such a cord remains cotton yarn rather than cotton fabric or a residuary unclassified good.

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