Processed surgical cotton classified as a pharmaceutical preparation, not ordinary cotton, under the 27.6.1990 notification.

Absorbent cotton wool I.P., commercially known as surgical cotton, was treated as a processed commodity with a distinct commercial identity rather than as plain cotton in its ordinary sense. Because it had undergone cleaning, purification, bleaching and similar treatment, and was recognised in trade as a pharmaceutical preparation, it was classified under Item 56 of the 27.6.1990 notification instead of Item 16. The residuary entry was also rejected because the product answered the specific description of a pharmaceutical preparation. The applicable tax rate was therefore 6%, not 4% or the general rate.

---

---

Issues: Whether absorbent cotton wool I.P., commercially known as surgical cotton, fell under Item 16 of the notification dated 27.6.1990 as cotton taxable at 4%, or under Item 56 as a pharmaceutical preparation taxable at 6%, or under the residuary entry taxable at 10%.

Analysis: The commodity was not treated as plain cotton in its ordinary commercial sense. It was prepared by a process of cleaning, purification, bleaching and other treatment, and in the market it was known as surgical cotton. The earlier omission and later insertion of absorbent cotton wool I.P. in the notification also supported the view that the commodity had a distinct commercial identity. The reasoning accepted that the product had undergone processing sufficient to take it out of the cotton entry, but not enough to place it in the general residuary category, because it answered the description of a pharmaceutical preparation.

Conclusion: Absorbent cotton wool I.P. was held to fall under Item 56 of the notification dated 27.6.1990 and not under Item 16. The applicable tax rate was held to be 6%.

Final Conclusion: The writ petition succeeded only to the extent that the impugned classification at the general rate was rejected, but the petitioner's claim for taxation at 4% was not accepted.

Ratio Decidendi: Where a processed commodity acquires a distinct commercial identity and is known in trade as a pharmaceutical preparation, it is classified according to that commercial character rather than as ordinary cotton or under the residuary entry.

---