How does Template field exactly works in Category Configuration?\
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I created a new template file Test.html under templates/Default folder and then typed Test.html in Template field of one of the category but it didn't work.
Once you create the template in the Template editor, it takes you to the help on how to edit that template and its associated language files and the class to cal it inside your templates.
By default, when browsing categories, all listings is displayed using the Listing.html template. If you want to have specific templates for each category or specific category (By category I mean Main category or any sub category), then just create an empty template in the template directory and copy to it the template Listing.html then enter this new template name in the Edit category in the Category manager, then you can custyomize your new category specific template as you like. Of course you can apply this template to all sub categories of that category or its first sub cats level or to it only.
I followed your instructions but that category is still using Listing.html from the Default template.\
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Is there any other steps needs to be performed to achieve this?
If the program did not find the template you set in the Edit template, it will use the default listing.html file. Make sure of the file name and extension and its permissions.