G.P.Mathur, J. - (1.) THE controversy involved in all these writ petitions are inter-connected and, therefore, they are being disposed of by a common order. THE main question involved in writ petitions No. 3968 of 1978 and 4043 of 1978 relates to additional duty on excess wastage while the question involved in the remaining writ petitions is regarding imposition of duty on bottling wastage. It will be convenient to deal with the first group of the writ petitions earlier. Writ Petition No. 3968 of 1978 and writ petition No. 4043 of 1978
(2.) IN this group, writ petition No. 3968 of 1978 shall be treated as the leading case. This petition has been filed for quashing of ten orders of the Excise Commissioner passed between 26/28-6-1966 to 24- 11-1973 by which an amount of Rs. 81,94,310 has been levied as excise duty and fine on wastage of beer in excess of ten per cent and also the order dated 12-4-1978 by which the revisions preferred by the petitioner company against the aforesaid orders were dismissed by the State Government. The petitioner company owns a Brewery which is situated at Mohan Nagar, Ghaziabad wherein beer is manufactured under a licence in Form B-1 granted by the Excise Commissioner, U.P. in exercise of power conferred by Section 17 (2)of U.P. Excise Act (hereinafter referred to as the Act). The petitioner has also been granted a licence in Form F.L. 3 for in bond bottling of beer, for sale, by the Excise Commissioners in exercise of power conferred by Section 17(1)(d) of the Act. Para 918 of U.P. Excise Manual, Volume I, provides for maintenance of registers, some by the Officer-in-charge who is of the rank of an Excise Inspector and some by brewer in a brewery. One such register which is mentioned in Para 918 (a)(iv) of the U.P. Excise Manual has to be maintained by the Officer-in-charge in Form B-16 and is called the Register of Manufacture and Issue of Beer. The Excise Inspector (Incharge) of the petitioner brewery, after verification of stock, made a report to the Excise Commissioner regarding wastage in excess of ten per cent of stock of beer. The Assistant Excise Commissioner, Meerut recommended for levy of fine in accordance with Para 912 of the Excise Manual. The petitioner was required to submit its explanation. After considering the explanation and other material, the Excise Commissioner held that the petitioner had not given any valid reason by way of mitigating circumstances to warrant a fine lower than the maximum contemplated in Para 912 of the Excise Manual and accordingly imposed a fine amounting to double the duty chargeable on wastage exceeding ten per cent in each of the cases. The petitioner preferred revisions against the said orders before the State Government which remained pending for a long time. Meanwhile Section 28-A was inserted with retrospective effect in the U.P. Excise Act by means of U.P. Act No. 9 of 1978. The State Government relying upon Section 28-A of the Act, dismissed the revisions. Before examining the contentions raised by learned Counsel for the parties, it will be convenient to reproduce the relevant statutory provisions of the U.P. Excise Act which are as under : Section 3 (3a). - "excise duty" and "countervailing duty" means any such excise duty or countervailing duty, as the case may be, as is mentioned Entry 51 of List II in the Seventh Schedule to the Constitution; Section 3 (10). - "beer" includes ale, stout, porter and all other fermented liquor made from malt; Section 3 (22a). - "excisable article" means - (a) any alcoholic liquor for human consumption; or (b) any intoxicating drug; Section 28. Duty on excisable articles.- (1) 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 : (a) imported in accordance with the provisions of Section 12 (1); or (b) exported in accordance with the provisions of Section 13; or (c) transported; or (d) manufactured, cultivated or collected under any licence granted under Section 17; or (e) manufactured in any distillery established or any distillery or brewery licensed, under Section 18 : Provided as follows - (i) duty shall not be so imposed on any article which has been imported into India and was liable on such importation to duty under the India Tariff Act, 1894, or the Sea Customs Act, 1887. (ii) ...........(omitted)..... Explanation. - Duty may be imposed under this section 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. (2) .........(omitted as not relevant). (3) .........(omitted as not relevant). Section 29. Manner in which duty may be levied. - Subject to such rules, as the (Excise Commissioner) may prescribe to regulate to the time, place and manner of payment, such duty may be levied in one or more of the following ways as the (State Government) may by notification direct : (a) ...........(omitted as not relevant). (b) ...........(omitted as not relevant). (c) ...........(omitted as not relevant). (d) ...........(omitted as not relevant). (e) in the case of spirit or beer manufactured in any distillery established or any distillery or brewery licensed under Section 18 - (i) by a rate charged upon the quantity produced or issued from the distillery or brewery, as the case may be, or issued from a warehouse established or licensed under Section 18 (d); (ii) by a rate charged in accordance with such scale of equivalents, calculated on the quantity of materials used or by the degree of attenuation of the wash or wort, as the case may be, as the State Government may prescribe : Provided that, where payment is made upon issue of an excisable article for sale from a warehouse established or licensed under Section 18(d), it shall be at the rate of duty which is in force on that article on the date when it is issued from the warehouse. Section 28-A. Imposition of additional duty in certain cases. - (1) Where the quantity of spirit or beer in a brewery is found, on examination by such officer of the Excise Department as may be authorised by the Excise Commissioner in this behalf to exceed the quantity in hand as shown in the stock account, the brewery shall be liable to pay duty on such excess at the ordinary rates fixed under Section 28. (2) Where the quantity of spirit or beer is less than that shown in the stock account on such examination and deficiency exceeds ten per cent; (allowance to that extent being made to cover losses due to evaporation, sullage and other contingencies within the brewery, and also to cover loss in bottling and storage) the Excise Commissioner shall levy an additional duty at the rate of one hundred per cent of ordinary rates of duty in respect of such deficit as exceeds ten per cent over and above the ordinary rates of duty.
(3.) SECTION 24 of the U.P. Act No. 9 of 1978 by which SECTION 28-A was inserted in the Act provides that notwithstanding anything contained in the principal Act or any other law for the time being in force, for levy imposed by the Excise Commissioner before the commencement of this Act in respect of deficit quantity at the rate not exceeding the rate specified in SECTION 28-an whether described as fine or by any other name shall be deemed to be additional levy imposed under the said SECTION 28-A as if the provisions of this Act were in force at all material times. The main submission of the learned Counsel for the petitioner is that at the stage of levy and realisation of the excise duty, the respondents have calculated the deficiency in the stock of beer in a wrong manner inasmuch as, while taking the stock of beer in the brewery, the account of beer as finished product was not taken but something in the intermediate stage which was still in the process of manufacture was taken into consideration. It has been urged that no duty can be imposed prior to the stage of the happening of the excisable event and consequently the deficiency in the stock of beer has to be ascertained at that point of time and not at any earlier stage. This has been stated in paragraphs 8, 61 and 93 (b) of the writ petition which are being produced below : 8. That the process of manufacturing beer ends when the sullage and yeast cells are removed by filtration and fermentation ceases and manufactured bulk beer is ready to be transferred : (a) for bottling in bond; and (b) to casks for sale and human consumption as draught beer. 61. That in working out the deficiency in stock, the method adopted has been erroneous. What was required under paragraph 912 was to compare the stock of manufactured beer as mentioned in the stock account of beer and the actual stock of beer giving allowance for the quantity issued. What has been done in the instant case is to assume certain quantity as part of the stock account of beer which was not beer and was undergoing the process of manufacture into beer. Similarly the quantity of beer issued from the Brewery has not been taken in its entirety to be the quantity of beer issued. The quantity issued has been equated with the quantity actually bottled with the result that the quantity of beer which has been wasted in the process of bottling has been treated to be part of the stock of beer in the beer account. 93(b). That what is being subjected to the levy of penalty or penal duty before becoming a manufactured saleable article is the deficiency between the wort and the finished beer for sale, comprising of scum and yeast cells brought no top of fermenting wort, Co2 gas evolved, sullage etc. settled at the bottom of vats which impurities have to be eliminated etc. before beer could become saleable. Thus what has not come to exist as such saleable goods cannot be termed as excisable article.;