Cotton handkerchiefs remain exempt textiles when hemming does not change their essential character.

Mill-made handkerchiefs wholly manufactured from cotton and sold without further processing remained cotton textiles within Entries 29 and 30 of Schedule B to the Punjab General Sales Tax Act, 1948. Mere hemming or stitching of the edges did not alter their essential character, so the exemption for cotton textiles continued to apply. The articles also could not be treated as readymade garments, because a handkerchief is not comparable to apparel that comes into ready use as clothing. The disputed handkerchiefs therefore retained their exempt textile character and were not taxable as readymade garments.

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Issues: (i) Whether mill-made handkerchiefs wholly manufactured from cotton and sold in the same condition remained cotton textiles covered by Entries 29 and 30 of Schedule B to the Punjab General Sales Tax Act, 1948; (ii) Whether handkerchiefs could be treated as readymade garments.

Issue (i): Whether mill-made handkerchiefs wholly manufactured from cotton and sold in the same condition remained cotton textiles covered by Entries 29 and 30 of Schedule B to the Punjab General Sales Tax Act, 1948.

Analysis: Section 6 exempted from tax the goods specified in Schedule B. Entry 29 covered all varieties of cotton, woollen or silken textiles, including rayon, artificial silk or nylon, and Entry 30 extended the exemption to all varieties of textiles covered by Entry 29 on which knitting and embroidery work had been done. The handkerchiefs in question were wholly made of cotton and were sold without any further processing. The mere hemming or stitching of the edges did not alter their essential character as cotton fabric. On that reasoning, such handkerchiefs continued to fall within the exempt textile entries.

Conclusion: The issue was answered in favour of the assessee. Mill-made cotton handkerchiefs remained taxable-free textiles under Entries 29 and 30.

Issue (ii): Whether handkerchiefs could be treated as readymade garments.

Analysis: A handkerchief is not comparable to a dress or garment that comes into ready use as apparel. The character of a handkerchief as textile is not lost merely because it is hemmed or stitched. It therefore could not be classified as a readymade garment for the purpose of denying exemption.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Final Conclusion: The reference was substantially answered in favour of the assessee, the disputed handkerchiefs being held to retain their character as exempt cotton textiles and not as readymade garments.

Ratio Decidendi: Mere hemming or stitching of the edges of a cotton handkerchief does not change its essential character as cotton textile, and such an article cannot be treated as a readymade garment unless the statute clearly requires a contrary classification.

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