IMPORTANT POINT
Excise authorities can levy excise duty only on the beer after it has been manufactured. How this quantity is to be arrived at has to be determined according to Section 30 Punjab Excise Act rerad with Rule 35 of Punjab Brewery Rules.

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.

2. 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.

3. 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 by this Court in Mohan Meakin Ltd. v. Excise and Taxation Commissioner, H.P. and Ors. [1997(2) SCC 193] and described at page 196 as follows:-

"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."

4. Section 3 of The Punjab Excise Act, 1914, as applicable to the State of Haryana, specifies the excisable articles and one of the articles is alcoholic liquor for human consumption. Sections 31 and 32 which deal with the levy of excise duty read as follows:

"31. Duty on excisable articles:- 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, exported or transported in accordance with the provisions of section 16; or

(b) manufactured or cultivated under any licence granted under Section 23; or

(c) manufactured in any distillery established or any distillery or brewery licensed under Section 21:

Provided as 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 excisable 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 av