STATE OF U.P. & ORS. v. M/S MOHAN MEAKIN BREWERIES LTD. & ANR.

(d)·During pasteurization the filled bottles are immersed in water and the temperature of water is gradually raised to about 65°C after keeping for a fixed time, it is gradually called, with the expansion of gas the bottles burst to a G varying percentage depending on the varying quality of bottles from mould to mould and batch to batch and beer is mixed with water in the tanks.

150 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.

A (e) Some breakages do occur in capsuling, labelling and packing of filled bottles. (f) Sometimes rebottling may have to be done and loss on this account may occur.

40Copy pinpoint40. The appellant breweries are holding bottling licences · in form No.FL3 to bottle beer, governed by the U.P. Bottling of Foreign Liquor Rules, 1969 ('Bottling Rules' for short). Rule 6 provides that every licence granted in Form No. FL3 shall be subject to the conditions enumerated therein. Rule 7 C enumerates the additional special conditions applicable to bottling of India made liquor in bond under FL3 licence. Sub- rules (10) and (11) of Rule 7 are relevant for our purpose and they are extracted below :

0 "7. Following additional special conditions will be applicable to bottling of Indian Made Foreign liquor in bond under F.1.-3 licence: (1) to (9) xx xx x omitted as not relevant

·E (10) On the last working, day of every calendar month, after all the transactions for that day are made, the Excise Inspector lncharge shall take the stock of unbottled and bottled spirit 3rd beer/stored in the bottling warehouse, enter into the prescribed registers and ascertain the wastage of spirit in the bottling operations and storage in the bonded warehouse. (11) (a) An allowance up to one per cent may be made on the total quantfty of spirit and beer stored during a month for actual loss in bottling and storage. The licensee shall be responsible for the payment of duty on wastage in excess of one per cent,

(b) when the wastage does not exceed the prescribed limit, no action need be taken by the Excise Inspector lncharge but if an excess is found at the time of monthly stock taking

STATE OF U.P. & ORS. v. MIS MOHAN MEAKIN 151 BREWERIES LTD. & ANR. [R.V. RAVEENDRAN, J.]

the Excise Inspector shall submit a statement to the A Collector by the fifth day of the month in Form F.L.B. 10 showing the quantity of actual wastage and the duty to be paid by the licensee on the excess wastage. On receipt of the statement the Collector shall recover the duty from the licensee at the full rate of duty leviable on Indian made foreign spirit and beer."

A 1. The appellants contended that section 28A provides for an allowance of 10% to cover losses due to evaporation, sullage and other contingencies within the brewery and also to cover losses in bottling and storage. Rule 53 of the Brewery Rules as amended on 19.7.1975 (Rule 912 of the Excise Manual) provides for an allowance of 9% of the total stock of beer in the month to cover losses due to evaporation, sullage and other contingencies within the brewery. Rule 7(11 )(a) of the Bottling Rules provides for an allowance up to one per cent of the total stock of spirit during a month, for actual loss in bottling and storage. The appellants submitted that section 28A did not make such a division of 10% allowance, into 9% for loss in the brewery and one percent for loss in bottling; and that therefore it is impermissible to divide the wastage under tWo separate heads of 9% wastage to cover losses due to evaporation, sullage and other contingencies within the brewery under rule 53 of the Brewery Rules, (para 912 of U.P. Excise Manual) and only one percent, for losses in bottling and storage urider the Bottling Rules. According to them the wastage in bottling can itself go to an extent of 10%. At all events, if the total wastage. due to evaporation, sullage and other contingencies in the brewery and the total wastage in bottling and storage, together did not exceed 10%, no duty or additional duty could be levied on the assumption that the losses in bottling and storage was restricted only to one percent, as such division would be contrary to section 28A of the Act.

42Copy pinpoint42. Rule 53 of Brewery Rules made in 1961 (para 912 of the Excise manual) before the amendment on 19. 7 .1975 H

152 SUPREpAE COURT REPORTS [2011] 14 (ADDL.) $.C.R.

A provided for allowance of a deficiency not exceeding 10% to cover losses in bulk due to evaporation, sullage and other contingencies within the brewery. At that time a separate licence for bottling was not contemplated. The Bottling Rules made in 1969 provided for an allowance of one percent loss in bottling B and storage. On 19.7.1975, Rule 53 (para 912 of Excise manual) was substituted and the allowance to cover losses due to evaporation, sullage and other contingencies within the brewery was reduced to 9% in view of the provision in the Bottling Rules providing for an allowance of one percent for c losses in bottling and storage. Section 28A was inserted by U.P. Act 9 of 1978 (with a provision that the section shall be deemed always to have been inserted) providing for an allowance to a total extent of 10% in regard to losses within the brewery and the losses in bottling and storage. It is not in dispute that the process of brewing beer and the process of 0 bottling beer are considered to be distinct and separate processes governed respectively by the Brewery Rules and Bottling Rules. The operations connected with bottling are required to be conducted in a separate premises under a different licence. The process of bottling begins with the transfer of bulk beer from the brewery for bottling. Sub-section (2) of section 28A refers to an allowance to an extent of 1oo/o not only in regard to losses within the brewery but also to cover losses in bottling and storage. As noticed above, Rule 53 of the Brewery Rules and Rule 7(11) of the Bottling Rules whe11 read conjointly show that the said rules are supplementary to each other and together implement section 28A of the Act. At all events, the validity of neither Rule 53 of Brewery Rules nor Rule 7(11) of Bottling Rules is under challenge. Be that as it may.

43Copy pinpoint43. The brewery having obtained the bottling licence subject to the special conditions which include the condition in Rule 7(11) of the Bottling Rules, cannot ignore the said Rule and contend that the allowance for losses in bottling could be more than one percent, that is upto ten per cent. In view of the above there is no merit in the contention of the breweries that

STATE OF U.P. & ORS. v. MIS MOHAN MEAKIN 153 BREWERIES LTD. & ANR. [R.V. RAVEENDRAN, J.] they are entitled to allowance of ten per cent towards losses in bottling and storage after the excisable article has left the Brewery. The appeals are therefore liable to be dismissed.

Conclusion :

44Copy pinpoint44. CA Nos.4708-4709/2002 are allowed and the order of the High Court in Civil Misc. WP Nos.3968/1978 and 4043/ 2008 are set aside and the said writ petitions are dismissed.

45Copy pinpoint45. CA Nos.4710, 4711, 4712 & 4713/2002 are dismissed affirming the decision of the High Court dismissing C C.M. W.P. Nos.1375/1978, 3690/1979, 4136/1978 and 4157/ 1978, though for reasons, somewhat different from the reasoning of the High Court.

D.G. Appeals disposed of. D