- (1.) This appeal by special leave arises from the judgment of the division bench of the Himachal Pradesh High court, made on 2/7/1980 in Writ Petition No. 121 of 1979. The question is: At what stage the beer is exigible to duty under the Punjab Excise Act, 1914 (1 of 1914 (for short "the Act"). The division bench upholding Rule 10 (3.4 of the Rules made under Section 58 of the Act read with Section 59 of the Punjab Breweries Rules, 1932 (for short "the Rules") , came to the conclusion that it is exigible to duty at the stage when it is in fermentation, i. e. , wort in terms of Rule 10 (3.4. Calling that decision in question, this appeal came to be filed.
(2.) With a view to appreciate correctness of the view taken and having heard the learned counsel for the parties, it is necessary to look: into the relevant provisions of the Act and the Rules. Ch. I, Section 3 of the Act defines various words and phrases in the Act. Section 3 (1 defines "beer" to include ale, porter, stout, and all other fermented liquors made from malt. "liquor" has been defined under Section 3 (14 of the Act to mean "intoxicating liquor and includes all liquid consisting of or containing alcohol: also any substance which the State government may by notification declare, to be liquor for the purpose of this Act". "excisable article" has been defined in Section 3 (6 to mean any alcoholic liquor for human consumption; or any intoxicating drug. "excise duty" and "countervailing duty" as defined in Section 3 (6-b) would mean any such excise duty or countervailing duty, as the case may be, as is mentioned in Entry 51 of List II of the Seventh Schedule to the Constitution. "intoxicant" under Section 3 (12-a) means any liquor or intoxicating drug as has been defined in Section 3 (16 to include every process, whether natural or artificial by which any intoxicant is produced or prepared, and also re-distillation, and every process for the rectification, reduction, flavouring, blending or colouring of liquor. "place" has been defined under Section 3 (17 to include a building, shop, tent and closure, booth, vehicle, vessel, boat and raft. "spirit" has been defined in Section 319 to mean any liquor containing alcohol obtained by distillation, whether denatured or not. Section 31 of the Act is the charging provision which envisages that an excise duty, or a countervailing duty, as the case may be, at such rate or rates as the State government shall direct, may be imposed, either generally or for any specified local area, on any excisable article. Section 23 of the Act prescribes removal of the excisable article from the distillery, brewery etc. and provides that no intoxicant shall be removed from any distillery, brewery, warehouse, or other place of storage established, or licensed under the Act, unless the duty, if any, payable under Ch. V has been paid or a bond has been executed for the payment thereof. Ch. V deals with the levy of duties and fees; the details of which are not material for the purpose of this case. As stated earlier, in this case the levy of excise duty was sought to be made at the stage when the manufacturing of the beer was at wort stage. The question is whether the levy of excise duty, on beer when it was in the process of manufacture is correct The levy of excise duty is on alcoholic liquor for humanconsumption, manufacture or production. At what stage beer is exigible to duty is the question. The process of manufacture of beer is described as under: "The first stage brewing process is the feeding of malt and adjuncts into a vessel known as Mash Tin. There it is mixed with hot water and maintained at certain temperature. The objective of this process is to convert the starches of the malt into fermentable sugar. The extract is drawn from the Mash Tin and boiled with the addition of hops for one to two hours after which it is centrifuged, cooled and received in the receiving Vats. At this stage, it is called 'wort' and contains only fermentable sugars and no alcohol. After this it is transferred to the fermentation tanks where yeast is added and primary fermentation is carried out at controlled temperature. After attenuation (Diminution of density of 'wort' resulting from its fermentation) is reached for fermented wort is centrifuged and transferred to the storage vats for secondary fermentation. After secondary fermentation is over in the storage vats, it is filtered twice first through the rough filter press and then through the fine filter press and received in the bottling tanks. It is in bottling tanks that the loss of the carbon dioxide gas is made up and bulk beer is drawn for bottling. It is filled into the bottles and then last process of pasteurisation is carried out to make it ready for packing and marketing. Till the liquor is removed from the vats and undergoes the fermentation process as mentioned above the presence of alcohol is nil. "
(3.) Excisable article would mean any alcoholic liquor for human consumption or any intoxicating drug. The levy or impost of excise duty would be only on alcoholic liquor for human consumption or for being produced in the brewery. Beer would mean fermented liquor from malt, when it is potable or in consumable condition as beverage. It is seen that the levy is in terms of Entry 51 of List II of the Seventh Schedule which envisages that duties of excise on the goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India.;