Terry towels remain exempt goods where edge-stitching does not create a new taxable commodity.

Terry towels and cotton terry knitted towels stitched on the edges were held to remain the same exempt commodity covered by the Third Schedule to the Tamil Nadu General Sales Tax Act. The court applied the principle that mere edge-stitching does not create a new or distinct article or alter the essential character of the goods. Because the goods had already been accepted as exempt in earlier assessment years, the Tribunal's classification of them as taxable stitched articles under the First Schedule could not stand. The goods were therefore treated as exempt, and the assessee succeeded.

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Issues: Whether terry towels or cotton terry knitted towels, stitched on the edges, are exempt goods falling under the Third Schedule to the Tamil Nadu General Sales Tax Act or are taxable as stitched articles under the First Schedule.

Analysis: The relevant schedule entry for terry towelling and similar woven terry fabrics places the commodity within the exemption schedule. The court noted that the goods sold were the same commodity in respect of which exemption had already been accepted for earlier assessment years. It also relied on the principle that mere stitching on the edges does not bring into existence a new and distinct commodity, and therefore does not alter the essential character of the goods. On that basis, the classification adopted by the Tribunal could not stand.

Conclusion: The goods are exempt under the Third Schedule and are not taxable as stitched articles under the First Schedule. The revision is allowed in favour of the assessee.

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