Exemption for wind turbine coatings upheld where paint was treated as an integral protective feature of the exempted machine.

A purposive reading of the exemption notification treated wind mills' paint as a protective external coating, not a separate constituent of the generator. The Tribunal reasoned that parts or components are items that make up the whole machine, but an integral finishing feature functionally incidental to the exempted product may still fall within the exemption. On that basis, paint applied to wind mills was held eligible for exemption as part of the wind operated electricity generator, and the Department's attempt to distinguish the coating from the exempted goods was rejected, with the demand and penalty set aside.

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Issues: Whether paints applied or coated on wind mills are eligible for exemption as parts or components of a wind operated electricity generator under the exemption notification.

Analysis: The exemption was construed purposively by examining whether the goods were externally applied for protection and finishing, rather than being a constituent element of the generator itself. The reasoning treated parts and components as items that make up the whole unit, while paint was characterised as a protective coating added to the finished article. On that approach, the Tribunal held that the coating of wind mills with paint did not cease to be part of the exempted wind operated electricity generator for the purpose of the notification, and the distinction sought to be drawn by the Department was rejected.

Conclusion: The paints used on wind mills were held eligible for the exemption notification, and the demand and penalty were set aside in favour of the assessee.

Ratio Decidendi: Where a notification exempts a complete machine and its parts or components, a protective external coating used as an integral finishing feature of the exempted goods may also fall within the exemption if it is functionally incidental to the exempted product.

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