Hydro-extraction after dyeing and bleaching was not ancillary to manufacture, so the exemption remained available.

Hydro-extraction carried out after dyeing and bleaching of cotton fabrics was not treated as an incidental or ancillary process to manufacture because the processed fabrics had already come into existence before the water was extracted. The later use of a hydro-extractor, even with power, did not alter the character of the earlier processing or displace the exemption claimed for the assessee. On these facts, the duty demand and penalty were unsustainable because the extraction step was not part of the completion of manufacture.

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Issues: Whether hydro-extraction done after dyeing and bleaching of cotton fabrics with hand-operated machines, but with the aid of power, was an incidental or ancillary process to manufacture so as to deny exemption and sustain the duty demand and penalty.

Analysis: The fabrics had already undergone dyeing and bleaching by hand-operated machines and the goods had come into existence as processed cotton fabrics before the water was extracted by hydro-extractor. On these facts, the later extraction of water could not be treated as a process incidental or ancillary to the completion of the manufacturing process. The use or alleged use of the hydro-extractor after the product was complete did not change the character of the earlier processing so as to bring it outside the exemption claimed by the assessee.

Conclusion: The hydro-extraction process was not incidental or ancillary to manufacture, the exemption was available, and the duty demand and penalty were unsustainable.

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