Own-manufacture use of naptha upheld; no diversion found, so purchase tax, interest and penalty were unwarranted.

Naptha purchased under Form No. 26/40 was held to have been used entirely in the assessee's own manufacturing process for generating electricity for its unit. The steam used in the second turbine was only a waste by-product of that process, and the limited wheeling of electricity to a sister concern did not amount to diversion of naptha for any non-qualifying purpose. On those facts, there was no breach of the incentive conditions, so purchase tax, interest and penalty under the Gujarat Sales Tax Act were not justified. The Tribunal's findings were factual, not shown to be perverse, and no substantial question of law arose for interference.

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Issues: Whether the use of naptha purchased under Form No. 26/40 was confined to the assessee's own manufacturing activity so as to negate any breach of the incentive conditions and, consequently, the levy of purchase tax, interest and penalty under the Gujarat Sales Tax Act.

Analysis: The entire naptha purchased under Form No. 26/40 was used in the gas turbine for generating electricity for the assessee's own unit. The steam used in the second turbine was only a waste by-product arising from that process, and the small quantity of electricity wheeled to the sister concern was generated from that steam. On those facts, no part of the naptha was diverted for any purpose other than the assessee's own manufacture. The Tribunal's findings were factual and were not shown to be perverse or vitiated by legal error.

Conclusion: There was no breach of Form No. 26/40, and the levy of purchase tax, interest and penalty was not justified. No substantial question of law arose for interference; the appeals were rightly dismissed.

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