Windmill transformer exemption turns on special design and notification scope, not tariff heading classification.

Exemption under Serial No. 12 of Notification No. 205/88-C.E. was treated as available to transformers used exclusively in windmills because the notification was read as covering windmills, their parts, and specially designed devices which run on windmills without any tariff-heading restriction. On the facts, the transformers were found specially designed for windmill use and necessary for starting the windmill and feeding electricity to the grid, so classification under Heading 85.04 did not defeat the exemption. A dissenting view considered transformers to be general electrical equipment outside the entry.

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Issues: Whether transformers used exclusively in windmills are eligible for exemption under Serial No. 12 of Notification No. 205/88-C.E. as windmills, parts of windmills, or specially designed devices which run on windmills.

Analysis: The majority held that the notification did not restrict the exemption by reference to any tariff heading and that the relevant entry covered windmills, parts of windmills, and any specially designed devices which run on windmills. On the facts, the transformers were found to be specially designed for windmill application and to perform a dual function essential for starting the windmill and feeding generated electricity to the grid. The majority further held that tariff classification under Heading 85.04 did not defeat the exemption because the notification itself imposed no chapter-heading restriction. The dissenting member held that transformers are general electrical equipment covered by Heading 85.04 and are not devices which run on windmills, and therefore the exemption was not available.

Conclusion: The transformers in question are eligible for exemption under Serial No. 12 of Notification No. 205/88-C.E. and the Revenue's appeal fails.

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