State Of U.P. & Ors vs M/S. Mohan Meakin Breweries Ltd. & Anr

4. The first respondent challenged the orders of the Excise Commissioner and the state government in Civil Misc. Writ Petition No.3968 of 1978. A Division Bench of the High Court allowed the said writ petition with other connected petitions by a common order dated 15.3.2002. It quashed the revision order dated 12.4.1978 and directed the state government to decide the revision afresh "after calculating the stock of beer for the purpose of original Rule 53 of UP Brewery Rules 1961 (Para 912 of UP Excise Manual as it then existed) and section 28-A of the UP Excise Act, when after filtration the same has assumed the shape as a finished product which is normally consumed by human beings as beverage or drink". In short the High Court has held that the point at which the liquor manufactured by the brewery was exigible to duty was at the stage, when the beer is capable of being consumed by human beings as a beverage, comes into existence and the deficiency should be worked out with reference to measurement at such stage. The High Court rejected the contention of the appellants that as soon as wort along with yeast is received in the fermenting vessels and ferments, the process of manufacture is complete. Feeling aggrieved by the decision of the High Court, the appellant has filed this appeal.

In cases where the officer attends before fermentation has materially affected the gravity he is able to verify these figures and above all to see that they have been recorded properly by the brewer.

34. We may now consider the contention on behalf of brewery that they are entitled to allowance upto 9% towards such wastage from the quantity measured in the storage/bottling tanks after fermentation and filtration. We extract below the contention of the Brewery in this behalf from its writ petition:

35. In fact, the brewery describes the nature of these losses in the brewery in Annexure I to the writ petition (in the connected WP No.1375/1978) as under:

The varying losses at each stage in the manufacturing process are natural and unavoidable. With the above mentioned variable losses, accidental, off chance occurrence or those losses which are incidental to the process of manufacture are provided for in rule 912 under "Contingencies".

(b) By sudden leakage of brine coiled pipes, the fermenting wort may be mixed up with brine which becomes unpalatable and has to be destroyed.

(c) With haziness persisting after filtration once, it may have to be treated with approved chemicals and refiltered.

(d) Bursting of transfer pipes, leakage of valves etc."

38. The question arising in this appeal is the same as in CA No.4708 of 2002 and the facts are also similar to the facts of CA Nos.4708 of 2002. The only difference in facts is that the demand in this case related to the period 3.6.1970 to 5.9.1972 and the amount of duty/additional duty that was demanded was Rs.1,40,596.89. For the reasons stated in CA No.4708/2002, this appeal is also allowed.

Re : CA Nos.4710, 4711, 4712, 4713 of 2002

39. All these four appeals relate to demands made upon the breweries for duty on excess wastage in bottling and storage of beer. The first appellant brewery has described the process of bottling of beer thus (in Annexure P2 to the writ petition - WP No.1375/1978):

43. The brewery having obtained the bottling licence subject to the special conditions which include the condition in Rule 7(11) of the Bottling Rules, cannot ignore the said Rule and contend that the allowance for losses in bottling could be more than one percent, that is upto ten per cent. In view of the above there is no merit in the contention of the breweries that they are entitled to allowance of ten per cent towards losses in bottling and storage after the excisable article has left the Brewery. The appeals are therefore liable to be dismissed.

Conclusion :

44. CA Nos.4708-4709/2002 are allowed and the order of the High Court in Civil Misc. WP Nos.3968/1978 and 4043/2008 are set aside and the said writ petitions are dismissed.

45. CA Nos.4710, 4711, 4712 & 4713/2002 are dismissed affirming the decision of the High Court dismissing C.M. W.P. Nos.1375/1978, 3690/1979, 4136/1978 and 4157/1978, though for reasons, somewhat different from the reasoning of the High Court.

.............................J (R. V. Raveendran) 50 .............................J (P. Sathasivam) New Delhi;

September 23, 2011.