Captive consumption is essential for windmill parts exemption; standalone towers later used in windmills do not qualify.

Exemption under Notification No. 205/88-C.E. was confined to windmills, specially designed devices running on windmills, and parts consumed within the factory of production for making those specified goods. Iron or steel towers cleared as standalone goods did not qualify because they were not captively used in the same factory to manufacture windmills, nor were windmills cleared from the factory in SKD/CKD or similar form. Their later use by buyers as components of windmills was insufficient. The notification was therefore treated as benefiting manufacture of the final exempt device and only incidentally the captive parts used in that manufacture, so exemption was denied.

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Issues: Whether iron or steel towers manufactured and cleared as such from the factory were entitled to exemption under Notification No. 205/88-C.E. as parts of windmills.

Analysis: The exemption covered windmills and specially designed devices running on windmills, and also parts consumed within the factory of production for manufacture of such specified goods. The towers in question were not captively consumed in the manufacture of windmills in the same factory, nor were windmills cleared from the factory in SKD/CKD condition or otherwise. The fact that the towers were later used by buyers as components of windmills was held insufficient to attract the exemption. The notification was construed as benefiting manufacturers of the final non-conventional energy device and, incidentally, the parts used captively in its manufacture.

Conclusion: The towers were not eligible for exemption under the notification, and the Revenue's appeal succeeded.

Final Conclusion: Exemption under the notification was denied because the cleared goods were only towers and not parts captively used in the manufacture of windmills.

Ratio Decidendi: Exemption for parts under the notification is available only when the parts are manufactured and captively consumed in the same factory for manufacture of the specified exempted device, not when they are merely cleared as standalone goods for later use by the buyer.

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