Made-up textile article test: cut terry towels needing stitching were held outside the exemption.

Terry towels produced in cut lengths and requiring stitching at both ends were not "made up textile articles" under Chapter Note 5(b) of Section XI because the goods had not emerged in a finished state ready for use merely by cutting dividing threads; the need for further sewing meant they did not satisfy the statutory description. Relying on the HSN Explanatory Notes, the article had to come out as a separate finished item without additional stitching. As a result, the towels were outside Notification No. 65/87 and the exemption was denied.

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Issues: Whether terry towels manufactured in cut lengths and stitched at both ends were covered as "made up textile articles" entitled to exemption under Notification No. 65/87.

Analysis: Chapter Note 5(b) of Section XI required the article to be produced in the finished state, ready for use, or merely needing separation by cutting dividing threads, without sewing or other working. The towels emerged from the machine in lengths connected by dividing threads, but after cutting they still required stitching at both ends to become ready for use. The requirement of sewing showed that the goods were not ready for use merely upon separation of the lengths. The HSN Explanatory Notes also supported the view that the relevant articles must emerge as separate fringed articles without further sewing, and that fabric requiring sewing to become usable falls outside the expression "made up" articles.

Conclusion: The towels were not made up textile articles within Chapter Note 5(b) and were not entitled to the benefit of Notification No. 65/87.

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