1996 (11) TMI 447 - SC - Central Excise

At what stage the beer is exigible to duty under the Punjab Excise Act, 1914? Held that - It is the place of storage, with reference to which duty is liable to be paid, as envisaged under Section 23 of the Act read with the Rule made by the Government.The appeal is, therefore, allowed and the respondents are entitled to collect the excise duty as per the rates specified by the Government in exercise of the power in Chapter V of the Act from the appellant when the appellant removed beer from the place of storage/warehouse etc.

Summary

Issues Involved:
1. Stage at which beer is exigible to duty under the Punjab Excise Act, 1914.
2. Definition and interpretation of "alcoholic liquor for human consumption."
3. Legislative competence of State vs. Central Government in levying excise duty on alcohol.

Detailed Analysis:

1. Stage at which beer is exigible to duty under the Punjab Excise Act, 1914:
The primary issue in the case was determining the stage at which beer becomes exigible to duty under the Punjab Excise Act, 1914. The Division Bench of the Himachal Pradesh High Court upheld Rule 10(3.4) of the Rules made under Section 58 of the Act, concluding that beer is exigible to duty at the stage of fermentation, i.e., wort. The Supreme Court, however, examined the provisions of the Act and the Rules, particularly focusing on Section 31, which is the charging provision. The Court noted that excise duty is imposed on alcoholic liquor for human consumption. The process of manufacturing beer involves several stages, and it is only at the final stage, when the beer is filtered, carbonated, and bottled, that it becomes a consumable product. The Court concluded that the duty is exigible only when the beer reaches the bottling tank or is removed from the storage warehouse, as per Section 23 of the Act. Thus, the beer is not exigible to duty at the wort stage but only when it is a finished product ready for consumption.

2. Definition and interpretation of "alcoholic liquor for human consumption":
The Court explored the definition of "alcoholic liquor for human consumption" and referred to the precedent set in Synthetics and Chemicals Ltd. vs. State of U.P. [(1990) 1 SCC 109], where it was held that "alcoholic liquor for human consumption" means liquor that is consumable as a beverage or drink. The Court emphasized that the term should be understood in its ordinary sense, referring to liquor that is ready for human consumption without further processing. The judgment clarified that the excise duty is applicable only on the final product that is fit for human consumption, not on intermediate products or raw materials in the manufacturing process. This interpretation was reinforced by the Court's reference to the ISI specifications, which differentiate between industrial alcohol and potable alcohol, with the latter being subject to excise duty.

3. Legislative competence of State vs. Central Government in levying excise duty on alcohol:
The Court discussed the legislative competence of the State versus the Central Government in levying excise duty on alcohol. It referred to Entry 51 of List II of the Seventh Schedule, which allows States to impose duties of excise on goods manufactured or produced within the State, including alcoholic liquors for human consumption. The Court also cited the decision in State of U.P. vs. Modi Distillery & Ors. [(1995) 5 SCC 753], which reiterated that the State's power to levy excise duty is limited to alcoholic liquors that are fit for human consumption. The judgment highlighted that industrial alcohol, which is not fit for human consumption, falls under the legislative competence of the Central Government. The Court concluded that the State can levy excise duty only on the final consumable product, not on intermediate stages of production.

Conclusion:
The Supreme Court allowed the appeal, holding that excise duty on beer is exigible only when it becomes a finished product and is ready for consumption, i.e., when it is received in the bottling tank or removed from the place of storage. The duty is not applicable at the intermediate stage of wort. The judgment reinforced the interpretation that "alcoholic liquor for human consumption" refers to the final consumable product and clarified the legislative competence of the State in levying excise duty on such products. The appeal was allowed with no costs.