CF0000110186 f IN TH33 EIGH_COURT_OF MDSYA PBABSSH AT JABALPUB MISC.PBTITION N0. ./I990. PETITIONEBS J r7/. .•VA? M/s.Chhatisgarh Distillery ^4 (M/s .Mohanlal Bhagwa-bi Prasad), Kedia Nagar, VillagesKhaprl, P.0. Kumhari, ~ - - / .DISTBICTsDUBG (H.P.). ^ ^^J-ff^^. f^c^C^^f , IT! Be€3-@Q:^3—PxtovideiTlT'Timd^^ommi^s-i^^e^^ Me^bya-^^aAasfe 9 i .Si-DQ^—JX^.). PETITION TfflDER ARTICLES 226 & 227 OF TEE COISTITUTION OF INDIA. FOB WRITS IN TH:g MTORE OF CERTIOBARI MiNDMUS PROHIBITION ETC . AND FOR .APPROPRIATE FUBTHm DIE@CTIONS. Y ^. Tbe petitioner, named-above, begs to state as -^=— s"""--^" CF0000110186 IN THS HIi MI PETITIONE (^ '"":'•"-";::11J::%~^ -p^^.}^^h^hc ..,.J?^^-'7)^ .^ ^, 0" \ 2.^-^" 'h c^^'' !i^/ " •II'^hA^1 ^ ^ £:"° .s^ W j a priTat^ 1 II I ^^•' / P^ovisioi is succes lal Bhag^ thereaft^ actiTity establisl Durg (M.] authorit; for manu: ^ jpr©vA<3@afc ^iad 2. issued b; 8- :\ HIGH COXJRT OF CHHATTISGARH AT BILASPUR WRIT PETITION No. 1521 of1990 Sis lsi w^ i^' s M^ '®-.^; PETITIONER RESPONDENTS M/s. Chhattisgarh Distillery Ltd. VERSUS Regional Provident Fund Commissioner, Chhattisgarh, Raipur. •t^ Post for pronouncement ofjudgment & order on ./...day ofApril, 2011. Sd/- SatishK.Agnihotri Judge Jjiv 8g ,. B£±iB ;- .-t m::...^^^^ &»•"" -A. "^?^ /' 1. E HIGH COURT OF CHHATTISGARH AT BILASPUR PETITIONER RESPONDENTS WRITPETITIONNo. 1521 of 1990 M/s. Chhattisgarh Distillery Ltd. VERSUS Regional Provident Fund Commissioner, Chhattisgarh, Raipur. PETITION UNDER ARTICLE. 226 & 227 OF THE CONSTITUTION OF INDIA SB: Hon'ble Shri Satish K. Asnihotri, J. ^1 o l!i.: Present: Shri Ashish Shrivastava, Advocate for the petitioner. Shri Pradeep Saxena^ Advocate for the respondent. ti II V; w • a.1:: ;K- K T^ (Delivered on .7. .'.day ofApril, 2011) By this petition, the petitioner seeks a writ in the nature of certiorari quashing the order No. M.P./l 681/P.F.-I-7., dated 24.04.1990 (Annexure A) wherein the respondent has directed the petitioner to deposit the amount of provident fund dues in respect ofall the eligible employees employed by the petitioner within 15 days failing which the amount due shall be determined under section 7-A ofthe Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short 'theAct, 1952'). The facts, in nutshell, as projected by the petitioner is that the petitioner is a private limited company duly incorporated under the provisions ofthe Companies Act, 1956. The petitioner company is successor-in-interest of a partnership firm M/s. Mohanlal Bhagwatiprasad. Thus, the petitioner is an establishment under the provisions ofsection 14 ofthe ]V[adhya Pradesh/Chhattisgarh Act, , v f:li'-.....,1 ^ w^^.^ ^ '^^/ .11 s !t; &.^ h::;^ 1111 • ' 11. II V Si, :1'si '!,{•' : ii B E' 3. 1915 (for short (the Act, 1915)\ The petitioner is carrying on the activity of manufacture of spirit in the Distillery established at village Khapri, Kumhari, District Durg. The respondent issued a show cause notice on 22.05.1989 (Annexure C) to the petitioner alleging non-compliance ofthe provisions oftheAct, 1952 and the schemes, to show cause asto why the petitioner company may not be prosecuted under section 14 and 14 A of the Act, 1952. The petitioner replied to the said show cause notice on 12.10.1989 (Annexure D) and questioned the applicability oftheAct and the scheme, relying upon the notification No. GSR-346, dated 7.3.1962. In the meantime, a decision dated 22.11.1989 was rendered in M.P. No. 1379 of 1981 wherein the same issue was settled. Accordingly, the petitioner filed an additional reply to bring it to the notice ofthe respondent on 22.01.1990 (Annexure E). However, the respondent, without taking into consideration the above decision of the High Court of Madhya Pradesh, passed the impugned order dated 24.04.1990 (AnnexureA) holding that the Act, 1952 and the scheme is applicable to the establishment ofthe petitioner. Shri Shrivastava, leamed counsel appearing for petitioner would submit that the issue involved in the instant petition is asto whether or not, the provisions ofthe Act, 1952 and the scheme, had already been considered and settled by the High Court of Madhya Pradesh in M.P. No. 1379 of 1981, as it was held therein that the establishment is not covered by the notification dated 7.3.1962 in question, and further, that warehousing of liquor cannot be said to .i;.;; K 4. be only an incidental activity. It is one of the essential activities and which is clearly excluded from the notification. Further activity conceming bottling of liquor fit for supply, is not an activity covered by the notification. Shri Shrivastava would further submit that the rectified spirit, which is manufactured in the distillery, is there after brought in the excise warehouses by the D-1 licensee, where reduction of the rectified spirit, in order to make it consumable takes place. Reducing, as defined in Distillery and Warehouse Rules, means the reducing of spirit from a higher to lower alcoholic strength by addition ofwater. This is popularly known as dilution. To this reduced spirit, colour and essence are added which are ultimately bottled and sealed in different quantities. Thereafter, it becomes consumable. Thus, the impugned order is erroneous and illegal. On the other hand, Shri Saxena, leamed counsel appearing for the respondent would submit that the petitioner establishment is engaged in manufacturing of Alcohol of different types. The activities of the petitioner establishment falls within one of the activities specified under the Schedule I ofthe Act, 1952 namely Distillation and Rectifying of the Spirits (not falling under Industrial and power alcohol) and blending of spirits industry. The petitioner establishment is covered under the schedule head "Distilling and Rectifying of Spirits" vide GSR No. 1688, dated 15.10.1963, which in fact was not under challenge in the decision of the High Court of Madhya Pradesh. The work done in the warehouse, falls under the definitions of manufacturing process as 's ::11 !:iiyij; 1EI ,K ir: !i: fi^ ilfi JSt IIII defmed in section 2(ic) of the Act, 1952 as in the warehouse, water, colour, essence is added to liquor and it is packed and sealed in the bottles. The liquor then becomes consumable, is sold and supplied by the vendors to the customers. The question involved in this petition is asto whether the establishment engaged in the activity of distillation of liquor by adding water, colour and essence and then packed in bottles which becomes consumable after the above stated process, comes within the defmition of "distillation and rectification of spirits and blending of spirits industry". By G.S.R. 1605, dated 26.09.1963, which came into effect from 31.10.1963, the word '[the distilling and rectifying of spirits (not falling under industrial and power alcohol" and blending industry]' was added to schedule 1 oftheAct, 1952 under section 2(i) and section 4 ofthe Act, 1952. Further, the provisions oftheAct, 1952 is also applicable to the establishment engaged in purchase, sale or storage of any goods, including establishments of exporters, importers, advertisers, commission agents and brokers and commodity and stock exchanges but not including bank or warehouses established under any Central or State Act, which was made applicable on 30.04.1962 by G.S.R. 346 dated 7.3.1962. It is useful to refer the relevant provisions of the Act, 1952 for better appreciation of the dispute involved herein. The word 'industry' is defmed in section 2(i) ofthe Act, 1952, which reads asunder: M ^n^sr; a m^. i.si m mi "2(i) "industry" means any industry specified in Schedule I, and includes any other industry added to the Schedule by notification under section 4;" Section 2(i-c)ofthe Act, 1952 defmes the term "manufacture" or "manufacturing process" as under; "2(i-c) "manufacture9 or 'manufacturing process9 means any process for making, altering, repairing, omamenting, fmishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal;9' Sub-section (3) of section 1 of the Act, 1952 provides for applicability of the provisions of the Act, 1952 which reads as under: "l.Short title, extent and application. XXX XXX XXX XXX XXX XXX (3) Subject to provisions contained in section 16, it applies - (a) to every establishment which is a factory engaged in any industry specified in Schedule I and in which twenty or more persons are employed, and (b) to any other establishment employing twenty or more persons or class of such establishment which the Central Govemment may, by notification in the Official Gazette, specify in this behalf: Provided that the Central Government may, afiter giving not less than two month'sriotice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such number of persons less than twenty as may be specified in the notification. 4. Notwithstanding anything contained in sub-section (3) of this section or sub- section (1) ofsection 16, where it appears to the Central Provident Fund Commissioner, whether on an application si^s^\ A'*- J».' '^-.^'^ L^' 't ^^" ^^"^"' Kl 11^' M. B II I.'' :hf, [M: !ri!: r7fi! ifi! i^:1 m ^'-{- made to him in this behalf or otherwise, that the employer and the majority of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to the establishment, he may, by notification in the Official Gazette, apply the provisions of this Act to that establishment on and from the date of such agreement or from any subsequent date specified in such agreement. (5) An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty." qp\ :1!1 1 r 1i.r' 10. Sectionl4 ofthe Act, 1915, reads as under: "14. Establishment or licensing of distilleries and warehouses. - The Excise Commissioner may - (a) establish a distillery in which spirit may be manufactured under a licence granted under Section 13 on such conditions as the State Govemment may impose; (b) discontinue any such distillery; (c) licence, on such conditions as the State Government may impose, the construction and working of a distillery or brewery; (d) establish or licence a warehouse, wherein any intoxicant may be deposited and kept without payment of duty, but subject to payment of such fee as the State Government may direct; and (e) discontinue any such warehouse." 11. Contention ofthe petitioner is that the issue involved herein has already been settled by the High Court ofMadhya Pradesh in The Central India Excise Traders, Mount Road Extension Nagpur & ;F:|g||\.^^fe^.s, n^-y c^^ ltt., Another v. The Regional Provident Fund Commissioner, M.P. Indore & Another1. 12. The case ofthe Department before the respondent was as under: "(iv) ...The present case is not a case where the establishment is covered under the Trading & Commercial establishment" but in the instant case the establishment is covered under the Scheduled head 'Distilling and Rectifying its spirits" vide G.S.R. no. 1688 dated 15.10.1963. Therefore the notification pointed out by the establishment has no application in the instant case. " 13. The respondent found the undisputed facts as under: "(i) It is not in dispute that the establishment M/s. Chhattisgarh Distillery (M/s Mohanlal Bhagwatiprasad) is a covered establishment under the Scheduled head "Distilling and Rectifying of -Spirits". (ii) It is also not in dispute that the establishment is running ware-houses and has obtained the licence from the State Government. In these ware- houses spirit is obtained from the establishment and from one other distillery and water, colour and essence are added and then it is packed and sealed in the bottles and stored. These bottles are then supplied to retail vendors for sale. (iii) It is also an admitted position that the establishment has employed employees in these ware-houses on daily wages and the wages paid to them are debited to the "wages Account" of the establishment." 14. The respondent-Commissioner further obser^ed that the establishment has stated that the spirit which is manufactured by M.P.No. 1379/1981, decided on22.il. 1989 II •^t^' s:^.. ••s^: 'iili' ii£ ,^." III fe B8- .111 ili.:: ifc 8 i^r' :'^;-;' 8 the distillery is brought to the ware houses. Water, colour, essence is added to it and it is packed and sealed in bottles. The liquor then becomes consumable is sold/supplied to the vendors for ultimate use by the customers. The establishment has taken on rent the ware houses owned by the State Government and it has its own ware houses also and in all these ware ho uses the work carried out i.e. mixing of water, colour, essence in the liquor and thereafter packing and sealing in the bottles is done. This work which is done falls in the definition of manufacturing process as defined in Section 2(ic) ofthe Act, 1952. 15. As per submission before the respondent, according to the petitioner, the liquor was obtained from the distillery and water, colour and essence are added and then packed in bottles and supplied/issued to the retailers for sale. 16. The respondent Commissioner held that the decision of Central India Excise Traders is distinguishable as the High Court of Madhya Pradesh in the said case, did not consider asto whether the establishment falls within the definition of Scheduled head 'the distilling and rectifyingof spirits and blending of spirits industry9. The Commissioner observed that the issue before the High Court ofMadhya Pradesh m Central India Excise Traders was that asto whether the establishment ofthe petitioner therein was not covered by the notification under which "Trading and Commercial Establishments" have been brought under the purview oftheAct, 1952. I'li^ IE!: Sa 11 t! ^?l.!1..; s y?^; • •II. lt::.;iIII W! ;;^ fl yM^ 17. In Central India Excise Traders , the High Court of Madhya Pradesh, observed as under: "23. ..The regional Provident Fund Commissioner has thus proceeded on wrong premises in holding that the petitioner amongst other activities is engaged in sale and purchase of alcohol which as has been demonstrated above, is neither bome out from the terms of the licences nor from the provisions of the State Act. The reasoning and basis adopted by the Regional Provident Fund Commissioner, are, therefore, not sound to support his conclusiop that the petitioner's establishment is covered by the Notification. The Commissioner has also gone wrong in holding that warehousing is only an incidental activity ofthe petitioner. We have examined the relevant scheme of the State Act and the terms of the licence held by the petitioner to hold that the licence is basically for bottling of liquor and to warehouse it in the approved premises of the State Govemment for supply to the retail vendors. Warehousing of liquor, therefore, cannot be said to be only an incidental activity. It is one of the essential activities and which, as we have stated above, is clearly excluded from the Notification. The other activities concerning bottling liquor fit for supply is according to us not an activity covered by theNotification." 18. The finding ofthe authority below is that the petitioner-industry is not covered by the notification under which 'Trading and Commercial Establishments" have been brought under the pur^iew of the Act. The respondent-Commissioner has brought the petitioner-establishment under the Scheduled Head "distilling & rectifying ofspirits (not falling under industrial and power alcohol) and blending ofspirits industry". L'^' ^o 10 1'f. Ii" "s^: ^!^k •!ar -'Jli^ »M '^ ,11 '.ifeil I;ii 'iS Kl, ;^.!^ if';i; :t''!;i. '.r 19. The term 'distillation' has been defmed in Webster's Encyclopedic Unabridged Dictionary ofthe English Language, as under: "dis-til-la-tion, n. 1. the volatilization or evaporation and subsequent condensation of a liquid, as when water is boiled in a retort and the steam is condensed in a cool receiver. 2. the purification or concentration of a substance, the obtaining of the essence or volatile properties contained in it, or the separation of one substance from another, by such a process 3. a product of distilling distillate. 4. the act or fact ofdistilling or the state ofbeing distilled." 20. In Chambers 21 Century Dictionary, the term 'rectify9 has been defined as under: "rectify a< to put (a mistake, etc) right or correct; b. to adjust something. 2 chem to purify (eg alcohol) by repeated distillation. 3. elec to change (alternating current) into direct current. 4.math to determine the length of (a cur^e or an arc). Rectifiable adj. rectification noun 14c from Latin rectificare, from rectus right+ facere to make." 21. The term 'rectified spirif has been defmed in Concise Oxford English Dictionary, as under: "rectified spirit. n, a mixture of ethanol (95.6 percent) and water produced as an azeotrope by distilliation.9' 22. The term 'azeotrope' has been defined in the said dictionary as under: "azeotrope /n. a mixture of two liquids which has a constant boiling point and composition throughout distillation." 23. From reading ofthe above stated defmition, it is not clear whether the petitioner was engaged in the activity of rectification and 1II '; ";•-.. \ ..—^' '":-. ' it:2 '•• 1 ^g-pta 'i II;II'^ Ml i 11 distilling, as aforesated in the ware houses, which comes within the head of "distilling & rectifying of spirits (not falling under industrial and power alcohol) and blending ofspirits industry" or it was a part ofthe said industry. 24. InSir Shadi Lal Distillery & Chemical Works, Mansurpur, U.P. & Another v. State ofU.P. & Others2, the Supreme Court has held that "bottling of liquor is an integral part of manufacture and supplythereof." 25. The case of Madhya Pradesh Mineral Industry Association, Nagpur v. The Regional Labour Commissioner, ((^entral) , Lalapa Lingappa & Others v. Laxmi Vishnu Textile Mills Ltd4 wi^Reserve Bank oflndia v. Peerless General Finance & Investment Co. Ltd. & Other^ , relied on by Shri Shrivastava are not applicable to the facts of the case as they are on the object of social welfare legislation. The Act, 1952 is also indisputably a social welfare legislation. 26. The respondent has relied on a decision in support of his contention that the ware-house is a part of establishment which according to it, comes under schedule I ofthe Act, 1952. 27. This question cannot be decided in this petition as the authority below has not recorded its fmding asto whether the ware house was a part of the establishment of the petitioner which was engaged in rectification and distillation of spirits, as aforestated. ' (1998)88cc 428 ' AIR 1960 SC 1068 (V 47 192) 'AIR 1981 SC 852 ' AIR 1987 SC 1023 n \ '^ •^.•^^ ' V/ ^^ 12 Section 1(3) ofthe Act, 1952 is an enabling provision wherein it is clearly provided that the provisions of the Act, 1952 would be applicable to every establishment which is a factory engaged in any industry specified in Schedule I and in which 20 or more persons are employed. 28. It is not in dispute that the industry engaged in distillation and rectifying of spirits (not falling under industrial and power alcohol) and blending industry, is specified in Schedule I ofthe Act, 1952. thus, it is incumbent on the respondent-Commissioner to decide asto whether firstly, as aforestated, that the establishment comes within the definition of distillation and rectification of spirits, as specified in Schedule I ofthe Act, 1952 and thereafter, whether the ware house is a part ofthe said establishment. 29. In view of the aforementioned analysis and reasons stated hereinabove, the impugned order dated 24.04.1990 (Annexure A) passed by respondent, is set aside and the matter is remitted back to the respondent-Commissioner to record the fmdings with regard to engagement of the petitioner in the activity of distilling and rectifying of spirits (not falling under industrial and power alcohol) and blending ofspirits industry, specified in Schedule 1 ofthe Act, 1952, in the light of the aforestated observations after affording proper opportunity ofhearing to the parties. 30. Further, having regard to the fact that the impugned order was passed on 24.04.1990 which was stayed by this Court vide order dated 21.06.1990, it is desirable that the respondent-Commissioner .i^,;"^ ^' '' '^. •M . •.:,:/ ^ !:ltf:y M^.^^/ i?l;i m ii^: 11!' ^2- 111, # l'WIil R B '.»;• •ill s' .11' •^li Amit ^ 13 may decide the case afresh, as aforestated, as early as possible, preferably within a period offour months from today. 31. Accordingly, the writ petition is allowed. 32. No order asto costs. Sd/- SatishK.Agnihom Judge llt::' fc II.