Hydro-extraction of cotton fabrics is not manufacture, so exemption cannot be denied on that basis.

Squeezing water out of cotton fabrics by hydro-extraction or drying with power was treated as a mere removal of moisture before drying, not as manufacture. The Tribunal noted that Larger Bench rulings had already settled that such hydro-extraction, even when done with a motor-operated padding mangle or similar powered equipment, does not amount to manufacture and is not merely ancillary to manufacture for the purpose of denying exemption. Applying that binding view, the notification benefit could not be refused on the ground that the process amounted to manufacture, and the demand failed.

---

---

Issues: Whether squeezing out water from cotton fabrics by hydro-extraction or drying with power amounted to manufacture so as to deny the benefit of the exemption notification and sustain the duty demand.

Analysis: The Tribunal noted that the undisputed process was only the removal of water from the fabrics before drying by means of a motor-operated padding mangle or hydro-extraction machine. The issue had already been authoritatively decided by Larger Bench decisions holding that hydro-extraction or drying with the aid of power does not amount to manufacture and is not merely ancillary to the process of manufacture for the purpose of denying exemption under the notification. Following that binding view, the Tribunal held that the benefit of the notification could not be refused on the ground that the process amounted to manufacture.

Conclusion: The issue was decided in favour of the assessee.

---