I have highlighted some of your text in bold - and inserted some of mine. I cannot see where the text of the legislation says that or anything which permits your interpretation to be made.
The three conditions are separate: 1. Possession of component(s). (Check.) 2. Intent to manufacture rounds. (Check). 3. If you were to do so, an offence would be committed under ..etc...etc. The third condition does not require any intent or act to break the rules, an offence is committed anyway.
All the text says is " the person intends to manufacture ammunition to which section 1 applies using those parts,". No ammunition needs to be made, nor does there need to be an intention to make too much at any one time.
In a common law jurisdiction, the law has the effect a court decided it should have based on the text, legal opinion and precedents. Precedents are created by other people's interpretations. There is no particular requirement that the law must have the effect that the people who wrote it claimed to intend.
With this text on the statute books, it would be entirely legitimate for a force with a chippy senior officer, to have FEOs inspect all FAC holders. All holders found to have enough of any one component to exceed their allowances can then be arrested. Presumably their FACs will be revoked, and guns and equipment seized, pending trial. It doesn't much matter what the outcome of the trial is. It's certainly not sensible or moderate behaviour, but it's also not implausible from the sort of senior police officers who thought that using police roadblocks, police aircraft and drones to make spurious arrests and issue fines which didn't hold up in court was a good use of resources. It has a strong virtue-signalling component, would create an almighty inconvenience and cost to shooters and many would never get their certificates back afterwards.