Essential components of wind turbines qualify for exemption, and procedural place-of-use conditions cannot defeat the substantive relief.

Bearings supplied for use in wind operated electricity generators were treated as essential components of the wind turbine and therefore qualified as exempt parts of non-conventional energy devices under the notification. The exemption was not defeated by a procedural condition relating to use outside the factory, because once the goods fell within the main exemption entry, the place of use became irrelevant. The commentary also states that the substantive exemption prevails over the procedural clearance condition, and that goods established as integral parts of an exempt device remain eligible for relief.

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Issues: (i) Whether bearings manufactured and supplied for use in wind operated electricity generators qualified as components or parts of non-conventional energy devices so as to merit exemption under the notification. (ii) Whether non-compliance with the procedural condition relating to use outside the factory of production disentitled the goods from the exemption.

Issue (i): Whether bearings manufactured and supplied for use in wind operated electricity generators qualified as components or parts of non-conventional energy devices so as to merit exemption under the notification.

Analysis: The notification exempted wind operated electricity generators, their components and parts, and the exemption continued after amendment. The bearings were directly supplied to manufacturers of wind turbine generators and were used as an integral component of the wind turbine. Applying the principle that a part is an essential component without which the whole cannot function, the bearing was treated as an essential component of the wind mill.

Conclusion: The bearings were eligible for exemption as components or parts of wind operated electricity generators, in favour of the assessee.

Issue (ii): Whether non-compliance with the procedural condition relating to use outside the factory of production disentitled the goods from the exemption.

Analysis: Once the bearings were held to be parts of wind mills covered by the main exemption entry, the place of use lost relevance. The procedural condition governing concessional clearance for goods used elsewhere did not override the substantive exemption available under the relevant serial entry.

Conclusion: Non-compliance with that procedural condition did not defeat the exemption, in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed, as the goods were held to fall within the exempted category of parts of wind operated electricity generators.

Ratio Decidendi: Where goods are established as essential components of an exempted non-conventional energy device, they qualify as exempt parts under the notification and a procedural condition relating to place of use cannot deny the substantive exemption.

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