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TMI Blog2002 (2) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... n on which excise duty could be imposed. The said Rule is neither invalid nor does it require to be read down. Allow this appeal and set aside the decision of the High Court, but remand the case to the Financial Commissioner for a fresh decision in accordance with law and in the light of the observations made in this judgment. - Appeal (civil) 1999 of 1997 - - - Dated:- 12-2-2002 - B.N. KIRPAL SHIVARAJ V. PATIL BISHESHWAR PRASAD SINGH, JJ. JUDGMENT KIRPAL, J. The challenge in this appeal is to the decision of the High Court relating to levy of excise duty on the beer brewed by the respondent. This appeal arises from the decision of the High Court which had allowed the respondent s writ petition and quashed the demand raised by the appellant in respect of the years 1986-87, 1987-88 and 1988-89. According to the appellant, this demand was raised because the wastage which was shown by the respondent in the brewing of beer was more than 10 per cent prior to the year 1986-87 and 7 per cent thereafter. In Order to understand the controversy, it is necessary to first examine the process in connection with the manufacture of beer. This process has been referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows; (i) duty shall not be so imposed on any article which has been imported into India and was liable on importation to duty under the Indian Tariff Act, 1894, or the Sea Customs Act, 1878; Explanation : Duty may be imposed under this Section at different rates according to the places to which any excisable article is to be removed for consumption, or according to the varying strength and quality of such article." "32, Manner in which duty may be levied:- Subject to such rules regulating the time, place and manner as the Financial Commissioner may prescribe, such duty shall be levied rateably, on the quantity of exciseable article imported, exported, transported, collected or manufactured in or issued from, a distillery, brewery or warehouse:- Provided that duty may be levied:- (a) On intoxicating drugs, by an average rate levied on the cultivation of the hemp plant or by a rate charged on the quantity collected; (b) on spirit or beer manufactured in any distillery established or any distillery or brewery licensed, under this Act in accordance with such scale or equivalents calculated on the quantity of materials used or by the degree of attenuation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of excise duty payable by the respondent. Show cause notices were issued to the respondent wherein it was stated that the wastage referred to in Rule 35 was more than 10 per cent for the period 1986-87 and earlier and more than 7 per cent in the later years. It may here be noticed that for the period 1986-87 and earlier the wastage allowed was 10 per cent which was reduced to 7 per cent from August 1986 onwards. The plea taken by the respondent before the excise authorities was that the rate of wastage should have been more than what was prescribed. This plea was not accepted. Appeal was filed and after remand a fresh order was passed by the Excise Commissioner. The relevant part of this order is as follows: "1. Rule 35(1) clearly lays down that duty is to be paid either on the quantity brewed as entered in the brewing book by the licensee or as ascertained by Inspector and entered in Form B-6 by him whichever is higher. In form B-6, the quantity of worts collected is shown under column 51 after the worts are received in the collecting or fermenting vessel. The Brewery has not produced their brewing book to show any discrepancy and even otherwise the rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the outset, Mr. Mahendra Anand, learned senior counsel for the appellant submits that the State is not proposing to levy any excise duty on beer which had not been manufactured and had not become fit for human consumption. He submits that the High Court has not correctly construed the different provisions of the Act and the Rules, Mr. Anil B. Divan, learned senior counsel for the respondent, has supported the decision of the High Court and, while drawing our attention to the decisions of this Court in Mohan Meakin and Modi Distillery (supra), has submitted that in the registers what was entered was the quantity of liquid which was in the worts. At this stage, even the yeast had not been added and it could not be said that what was in the kettle as a wort was potable liquor on which excise duty could be levied. This quantity could not be a measure for calculating the amount of beer on which excise duty could be levied. He submitted that excise duty was payable only after all the processes in the manufacture of beer have been completed and on the endproduct an exemption of 7 per cent was to be allowed. He drew our attention to the Rules in Karnataka which had contemplated all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. After doing this, you determine the quantity of beer manufactured. An example which has been given is that a 1000 kgs. of malt should ordinarily yield 6500 litres of beer. By giving an allowance of wastage which must occur during the process of the manufacture of the end-product and limiting that allowance to 7 per cent, the quantity of beer manufactured on which excise duty would be levied would be 6500 litres less 7 per cent. It appears to us that the proviso to Section 32 read with Rule 35 does nothing more than to give a rough and ready method of calculating the quantum of beer which should have been manufactured in the normal process which is calculated on the basis of the raw material used. The idea, perhaps, is that full quantity of beer which is manufactured is accounted for. It will be seen that registers are maintained by the manufacturer and the figures are taken from there. From the records of the manufacturer, excise authorities will be able to ascertain the quantum of raw material used. It is open to the excise authorities to accept the figure indicated in the records of the manufacturer of the total quantity of beer manufactured. Duty can be levied on this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt. If this be so, then the excise authorities had to calculate and determine the exact quantity of beer manufactured by the respondent and then levy excise duty thereon. On the figures so determined, Rule 35 being inapplicable as contended by the respondent, the question of giving any allowance of 7 per cent for wastage would not arise. What follows from the above is that the excise authorities can levy excise duty only on the beer after it has been manufactured: the levy has to be on the quantity manufactured. How this quantity is to be arrived at has to be determined according to Section 32 read with Rule 35. We may, however, note that before the Excise Commissioner no dispute appears to have been raised with regard to the figures and the contention was that the percentage of wastage should have been more than 7 or 10 per cent. Mr. Divan, however, submits that this contention which was upheld by the High Court was raised subsequently. While in the body of the writ petition, it is stated that Rule 35 is violative of the Act, no specific prayer was made in the writ petition, but in the manner in which we have interpreted Rule 35 it appears to us that it is only an enabling provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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