Rajasthan High Court – Jaipur
M/S Winsome Brewwries Ltd vs B O R And Ors on 28 August, 2025
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HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Civil Writ Petition No. 7820/2007
M/s Winsome Breweries Ltd., a Company incorporated under the
Indian Companies Act, 1956 having its registered office at 24,
Community Centre, East of Kailash, New Delhi-110065 through
its Managing Director, Shri Rajendra Kumar Bagrodia S/o Shri
M.P. Bagrodia.
----Petitioner
Versus
1.Board of Revenue for Rajasthan at Ajmer.
2.State of Rajasthan through Secretary to Government,
Government of Rajasthan, Finance (Excise) Department,
Secretariat, Jaipur.
3.Commissioner Excise, Government of Rajastan, Udaipur.
4. District Excise Officer, Excise Department, Alwar.
----Respondents
For Petitioner(s) : Ms. Alankrita Sharma
For Respondent(s) : Mr. Jaivardhan Joshi with
Mr. Lalit Bhardwaj on behalf of
Mr. Bharat Vyas (Sr. Adv.) AAG
HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA
HON'BLE MR. JUSTICE SANJEET PUROHIT
JUDGMENT
RESERVED ON :: 13/08/2025
PRONOUNCED ON :: 28/08/2025
(Per Hon'ble Mr. S.P. Sharma, J.)
THE BRIEF FACTS :
1. The petitioner-Company is stated to have a beer brewery
situated at District Alwar. It has been granted three licenses by
the Excise Commissioner of brewery, bonded warehouse and
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bottling since May-June, 1996. The said licenses have been
renewed from time to time.
2. The process of manufacturing beer is regulated by the terms
and conditions of the license. An Excise Inspector, or any such
Officer is required to hold the charge of the brewery, along with
supervisory staff for the purpose of supervision. For this purpose,
rent-free residential quarters are to be provided at the brewery for
them. The beer is stored in mash tuns and other vessels which are
gauged by the Officer In-charge and the licensee showing the total
capacity of each vessel. As per Rule 28 of Rajasthan Brewery
Rules, 1972, the Officer Incharge supervises the material which is
being used for the purpose of brewing of beer and the entry of any
material is with the permission and sanction of the supervisory
staff. The rules also provided restrictions from removing beer from
the brewery, until the duty imposed under Section 28 of Rajasthan
Excise Act, 1950 has been paid or bond has been executed by the
brewer for export of beer outside the State from the brewery. The
removal of beer is only allowed on an application being moved in
terms of Rule 45 of Rajasthan Brewery Rules, 1972, whereafter a
pass is issued by the Officer Incharge of the Excise Department.
The accounts of brewery and stock of beer are required to be
maintained in terms of Rule 53 of Rajasthan Brewery Rules, 1972.
3. It is stated that the petitioner had lodged complaints against
one Excise Guard in the year 1997 and the same was taken as a
front by the Department, which stopped the production by the
petitioner-Company and directed for a physical verification of the
stocks. Inspection of the stocks was conducted on 22 nd December,
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1997 and a noting was drawn of 4179 beer cases lying in excess.
The petitioner submitted objection to the Inspector, whereafter on
25th December, 1997, inspection was conducted afresh and the
total beer cases reported in excess were 1522.
4. On the basis of the excess beer, the Department issued an
order on 30th December, 1997, prima facie holding violation of
various excise provisions and suspended the licenses till further
orders, in terms of Section 34 of Rajasthan Excise Act, 1950. On
31st December, 1997, the Assistant Excise Officer seized the stock
and closed the factory and the Excise Commissioner imposed a
penalty of Rs.9,68,388/- vide the order dated 10th February, 1998.
5. The petitioner preferred an appeal against the imposition of
penalty, and the Board of Revenue vide its order dated 07th May,
2003, allowed the appeal and set-aside the order of the Excise
Commissioner dated 10th February, 1998. The Board further held
the suspension to be wholly illegal and declared the penalty as
unjustified. It is stated that at the time of suspension and
clearance, there were about 73,000 cases of beer lying in the
plant, however, on account of seizure for more than three months,
the beer became unfit for human consumption and was destroyed.
6. The Assistant Excise Officer, however, issued directions on
05th February, 2004 demanding excise duty on the unused
aforesaid beer for a sum of Rs.46,43,925/-. A reminder to deposit
was sent on 27th February, 2004, by the Department, to which the
petitioner submitted a reply on 6 th March, 2004 stating that they
were not liable to pay excise duty on the unused beer which was
rendered unfit for human consumption due to illegal seizure
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imposed by the Department. It was stated that on account of fault
of the Department, the petitioner cannot be made to suffer. The
petitioner preferred an appeal, however, the Excise Commissioner
upheld the order. Consequently, the District Excise Officer initiated
proceedings for recovery and adjustments against the dues
payable by the petitioner.
7. S.B. Civil Writ Petition, bearing No.5748/2004 was filed by
the petitioner and upon the petitioner complaining of causing
hindrance in operation of the factory, the respondents undertook
that they will not create any hindrance. However, because the
dispatch of goods was not allowed, a sum of Rs.15,00,000/- was
forcibly deposited by the petitioner under protest on 10 th August,
2004. On account of hindrances, the labels were also not
approved. After much delay, on 22 nd April, 2005, labels were
approved. Meanwhile on 11th April, 2005, another order was
issued raising a demand of Rs.46,43,925/-, as outstanding against
the petitioner, out of which, Rs.29,76,186/- was required to be
deposited. The bank was also asked to stop all the transactions of
the petitioner.
8. The petitioner moved stay application in the pending writ
petition. At that stage, the court allowed the petitioner to prefer
an appeal before the Board of Revenue in terms of Section 9-A of
the Rajasthan Excise Act, 1950 and the condition of pre-deposit of
the amount was dispensed with and further directed the
Department not to take any coercive steps till disposal of the stay
application by the Board of Revenue.
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Accordingly, the appeal was preferred before the Board of
Revenue. The Board of Revenue dismissed the appeal vide its
judgment dated 9th February, 2007 upholding the order passed by
the Excise Commissioner dated 1st April, 2004 maintaining the
recovery. Resultantly, the present writ petition was filed.
We noted that this court stayed further recovery from the
petitioner vide its order dated 11th November, 2009.
SUBMISSIONS OF THE PETITIONER:
9. Ms. Alankrita Sharma, learned counsel appearing on behalf
of the petitioner, has vehemently argued that once the order
dated 10th February, 1998 passed by the Excise Commissioner
imposing penalty and suspending the license was set aside by the
Board of Revenue on 7th May, 2003, the respondent Excise
Department could not have demanded the excise duty on old beer
which were lying in the factory, while the same was closed. She
submits that it was an admitted position that the old beer lying in
the stocks had become unfit for human consumption and was not
fit for sale. Its production cannot be said to be a production of
beer as beer would be treated as that which is fit for human
consumption and not otherwise.
She further submits that the Department cannot be allowed
to take advantage of their own wrong. She submits that
suspension order and seizure of the stock, closure of the factory
was held to be illegal, the order of suspension was quashed. It
was noticed that suspension order has been passed without
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following the principles of natural justice and there was no factual
basis to suspend the lincense.
She further submits that once the beer remained unused for
sale and being unfit for human consumption and had been
destroyed, imposition of excise duty solely on the basis of beer
having been manufactured was erroneous and unjustified. She,
therefore, prays to set aside the order dated 1 st April, 2004 passed
by the Excise Commissioner and the order passed by the Board of
Revenue dated 9th February, 2007. She further prays that recovery
demanded by the respondents be quashed and set aside and the
amount recovered forcibly under duress and paid under protest be
directed to be refunded alongwith interest as payable at the
relevant time, i.e. 12% per annum.
It is to be noticed that an amendment has been made in the
writ petition with regard to communications dated 17th April, 2008,
6th May, 2008, 15th January, 2009, 23rd January, 2009 and 3rd
February, 2009 whereby time to time demands had been raised
and recoveries had been effected from the petitioner. She prays
for quashing and setting aside the aforesaid letters too.
10. She has placed reliance on various judgments passed by the
Hon'ble Apex Court in the cases of (i) "Mohan Meakin Ltd. Vs.
Excise & Taxation Commissioner, H.P. & Ors." (1997) 2
Supreme Court Cases 193; (ii) "Govt. of Haryana Vs.
Haryana Brewery Ltd. & Anr." (2002) 4 Supreme Court
Cases 547; & (iii) "Mafatlal Industries Ltd. & Ors. Vs. Union
of India & Ors." (1997) 5 Supreme Court Cases 536.
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SUBMISSIONS ON BEHALF OF THE RESPONDENTS:
11. Per contra, learned counsel for the respondents has
supported the orders passed by the Board of Revenue as well as
by the Excise Commissioner. He submits that the beer lying with
the petitioner cannot be said to be out of purview of the provisions
of the Act. He submits that in terms of Section 3(14)(b) of the
Rajasthan Excise Act, 1950, the excise duty is payable on
production and not merely on sale. Once the petitioner has
admittedly produced the beer, the excise duty will be payable at
that stage itself.
He also relied on the judgment passed by the Supreme Court
in "State of Uttar Pradesh & Ors. Vs. Mohan Meakin
Breweries Ltd. & Anr." (2011) 13 Supreme Court Cases 588
to submit that excise duty becomes payable as soon as the
production of beer has been made in the brewery.
He also submits that provisions of Rule 50 of the Rajasthan
Brewery Rules, 1972, would only have given benefit of application
where beer had become unfit for human consumption on account
of act of God or by way of accident. In the facts of the present
case, he submits that as beer had been manufactured at that
point of time it was not unfit for human consumption, the excise
duty would have to be payable on the sale. He supports the order
passed by the Board of Revenue upholding the order of the Excise
Commissioner.
He further submits that it was the responsibility of the
petitioner for removal and sale of beer and excise duty liability
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cannot be exempted or condoned merely because the petitioner
did not sell the beer or that the beer subsequently became unfit
for human consumption.
It has been further submitted that if at all this court holds
the action of the respondents to be unjustified, the petitioner
would be required to move appropriate proceedings for seeking
refund.
PROVISIONS OF ACT/RULES AND CASE LAWS:
12. Section 3(1) of the Rajasthan Excise Act, 1950 provides as
under:
"Sec. 3(1)-"Beer" includes ale, stout, porter
and all other fermented liquors made from
malt;"
13. Section 28 of Rajasthan Excise Act, 1950, provides as under:
"28. 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 imported or exported,
or transported or manufactured, cultivated or
collected under any Licence granted under this
Act, or manufactured in any distillery, pot-still
or brewery established or licensed under this
Act.
Explanation: Duty may be imposed under this
section at different rates according to the
places to which any excisable article or
intoxicating drug is to be removed for
consumption or according to the varying
strength and quality of such article."
14. Section 29 of Rajasthan Excise Act, 1950, provides as under:
"29. Manner of levying duty - Subject to
such rules regulating the time place and
manner of payment, as the [State
Government] may prescribe, such duty may be
levied in such one or more ways as the [State
Government] may by notification in the [Official
Gazette] direct."
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15. Section 50 of Rajasthan Excise Act, 1950, provides as under:
"50. Duty Of Officers Of Certain
Departments To Report Offences And To
Assist Excise Officers.- Every officer of the
Police, Salt, Customs [Narcotics] and Land
Revenue Department shall be bound to give
immediate information to an officer of the
Excise Department of all breaches of any of the
provisions of this Act which may come to his
knowledge, and to aid, any officer of the Excise
Department in carrying out of the provisions of
this Act upon request made by such officer."
16. Rule 32 of Rajasthan Excise Rules, 1956 provides as under:
"32. Export in bond under pass- Any person
may export in bond Indian made Foreign Liquor
manufactured at a distillery in Rajasthan to any
place in India under a pass granted as provided
in the following rules."
17. Rule 85 of Rajasthan Excise Rules, 1956 provides as
under:
"85. Duty on foreign liquor and country
liquor payable before issue - (l) The duty on
manufacture imposed for the time being in
respect of foreign or country liquor shall be
payable before the issue of such liquor from the
distillery, brewery, warehouse or godown as
the case may be except where the issue is
under a bond for the payment of duty.
(2) Export duty in all cases is payable before
issue.
Provided that Excise Commissioner, if he is
satisfied that there are sufficient reasons for
doing so, may allow refund of excise duty paid
in respect of IMFL that after having brought
into the godowns of Rajasthan State Beverage
Corporation Limited had to be returned back or
destroyed.
18. Rule 2(b) of the Rajasthan Brewery Rules, 1972, provides as
follows:
"2(b)-"Beer" means any liquor prepared
from malt or grain. with/without addition
of sugar and hops and includes sale port
and stouti;"
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19. Rule 41 of Rajasthan Brewery Rules, 1972 provides as
under:
"Rule 41-Beer not to be issued until duty
paid or bond executed-No beer shall be
removed from a brewery until the duty imposed
under Section 28 of the Act has been paid or
until a bond under Section 18 of the Act in
Form R B II or R B 12 has been executed by
the brewer for export of beer outside the State,
direct from the brewery."
20. The Hon'ble Supreme Court in the case of "Mohan Meakin
Ltd. Vs. Excise & Taxation Commissioner, H.P. & Ors."
(supra), in Para Nos.2, 3 & 7 has held as under:
"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. Chapter I, Section 3 of the Act defines
various words and phrases in the Act. Section
3(1) defines "Bear" 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 redistillation, 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 3(19) 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
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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 Chapter V has
been paid or a bond has been executed for the
payment thereof. Chapter V deals with the levy
of the 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 presence
of manufacture is correct? The levy of excise
duty is on alcoholic liquor for human
consumption, 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
Tun. 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 Tun and
boiled with the addition of hops for one to two
hours after which it is contrifuged, cooled and
received in the receiving wats. 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 filed 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
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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.
7. Thus, the final product of the beer is relevant
excisable article exigible to duty under Section
31 of the Act when it passes through fine filter
press and received in the bottling tank. The
question is at what stage the duty is liable to be
paid? Section 23 specifically envisages that until
the payment of duty is made or bond is
executed in that behalf as per the procedure and
acceptance by the Financial Commissioner, the
finished product, namely, the beer in this case,
shall not be removed from the place at which
finished product was stored either in a
warehouse within factory premises or precinct or
permitted place of usage. Under these
circumstances, the point at which excise duty is
exigible to duty is the time when the finished
product, i.e., bear was received in bottling tank
or the finished product is removed from the
place of storage or warehouse etc."
21. The Supreme Court in the case of "Govt. of Haryana Vs.
Haryana Brewery Ltd. & Anr." (supra), in relevant Para No.12,
has held as under:
"12.We agree with the contention of Mr Divan,
and this is also not disputed by Mr Anand, that
the State has jurisdiction to levy excise duty only
on beer after it has been brewed and has
become fit for human consumption. This is the
settled position as laid down by this Court in
Mohan Meakin and Modi Distillery cases. The
only question which, to our mind, really arises
for consideration is how to determine the
quantity of beer which is manufactured on which
the excise duty is to be levied. Section 32 gives
an answer to this question. The first part of the
section states that subject to the rules which
may be made by the Financial Commissioner
excise duty is to be levied, inter alia, on the
excisable article manufactured in or issued from
a distillery, brewery or warehouse. A reading of
this section leaves no manner of doubt that the
stage at which excise duty can be levied is only
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after the process of manufacture has been
completed and in fact it is to be levied when it is
issued from the distillery, brewery or
warehouse."
22. In "Mafatlal Industries Ltd. Vs. Union of India & Ors."
(supra), the Constitution Bench of the Hon'ble Supreme Court
primarily dealt with the issue of refund of indirect taxes and laid
down the governing principles as to when and how a person may
claim refund of duty/taxes paid under the Central Excise and
Customs Law. The Court further proceeds with first principle of
doctrine of unjust enrichment. The law very specifically lays down
that if the claimant seeking refund has already passed the burden
of tax to the consumer, then claimant would not be entitled to
refund, otherwise, it would amount to unjust enrichment and
would not be liable to refund. It would be apposite to quote the
relevant Para Nos.121, 123, 160 of the judgment:
"121. In my judgment, apart from its boldness,
there is no merit in the contention that
guarantee contained in Article 265 of the
Constitution must be restricted to direct taxes
only. In my judgment, Article 265 must be
implemented in letter and spirit as it stands and
all the tax laws and all Government actions to
realise and retain tax must be tested on the
anvil of this guarantee. The courts should
jealously guard against any attempt to whittle
down or do away with any of the guarantees
given under the Constitution to the citizens. In
my judgment, Article 265 will have to be given
full effect in cases of direct as well as indirect
taxation. If any tax has been levied and
collected without authority of law, then the
State has committed a wrong and that wrong
must be undone by the State by returning the
tax unlawfully collected to the person from
whom it was collected.
123. A point has been made that the
manufacturer has passed on the burden of the
illegal levy to his customers by raising his price
of the goods. But that is no reason why the
guarantee given by the Constitution should not
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be enforced. The manufacturer may have been
compelled to raise the price because of the
imposition of an illegal levy. But that is no
reason to dilute the mandate contained in Article
265 of the Constitution. Article 265 forbids the
State from making an unlawful levy or collecting
taxes unlawfully. The bar is absolute. It protects
the citizens from any unlawful exaction of tax.
So long as Article 265 is there, the State cannot
be permitted to levy any tax without authority of
law and if any tax has been collected unlawfully
that must be restored to the person from whom
it was collected. If the tax has been collected
from any person unlawfully, it is the taxpayer's
money which is in unlawful possession of the
State. The State has a constitutional obligation
to give back the money to the tax- payer. An act
done in violation of constitutional mandate is
void and no right flows out of that void act to
the State. The State is in unlawful possession of
the taxpayer's property. The State cannot retain
it on any equitable ground nor can it give it to
any other person out of any supposed equitable
consideration. The constitutional mandate
cannot be ignored on the pretext of any rule of
equity or on the ground of what is perceived as
substantive justice. Every word of the
Constitution has to be treated as sacrosanct and
respected and obeyed by the State and the
Legislature and enforced by the Court.
160. The constitutional embargo is on both the
levy and collection of tax without authority of
law. It has been repeatedly asserted by the
Courts that every taxing law has three parts.
First is charge, the second is computation which
results in a demand of tax and the third is
recovery of the tax so computed. The
Constitution has enjoined that there must be a
valid levy. The word 'levy' has also been
understood in a broad sense in various cases to
include not only the imposition of the charge but
also the whole process upto raising of the
demand. The Constitution guarantees that not
only the levy should be lawful but also collection
of tax must also be done with the authority of
law. The State is not permitted to exact any tax
from a citizen without the authority of law and
without following the procedure laid down by
law. This guarantee has to be strictly enforced
not only in the matter of levy but also in the
matter of collection. It was pointed out by this
Court in the case of Municipal Council vs. Kamal
Kumar that Article 265 of the Constitution
clearly implies that the procedure to impose a
liability upon the taxpayer has to be strictly
complied with. Where it is not complied with,
the liability to pay a tax cannot be said to be
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according to law. In that case, a validly passed
municipal law was sought to be enforced, but
the objections of the ratepayer were not dealt
with by the Municipal Council as a whole but by
a sub-committee. The Court held that this was
erroneous. The phrase 'levy and collection'
indicates that all the steps in making a man
liable to pay a tax and exaction of tax from him
must be in accordance with law. There must be
a valid statute which will be properly followed.
All steps must be taken according to statutory
provisions. Recovery of tax must also be
according to law. No one can be subjected to
levy or tax or deprived of his money by the
State without authority of law."
The Court has further held that any claim of refund must
necessarily be made in accordance with the statutory provisions
applicable to the case, and statutory mechanism prescribed
therein cannot be bypassed.
23. The question was again examined by the Hon'ble Supreme
Court in the case of "State of Uttar Pradesh & Ors. Vs. Mohan
Meakin Breweries Ltd. & Anr." (supra) and in Para Nos.32 and
33 of the judgment, the Court has held as under:
"32. This Court also reiterated the said position in
Mohan Meakin Ltd. v. Excise and Taxation
Commissioner, H.P. but further observed that
beer would be exigible to duty when it passes
through the fine filter press (after fermentation)
and is received in the bottling tank. The words
"received in the bottling tank" obviously referred
to beer being received in any container or vessel
for storage, after fermentation and filtration. It
may however be noted that the said observation
that beer is exigible to excise duty only when it
passes through the fine filter press would apply
only to the standard types of beer which is sold
in bottles and cans. Beer is also supplied in casks
and barrels, taken directly from fermentation
vessels without undergoing any filtration or
further processing, known as draught (or draft)
beer. Such beer is unpasteurized and unfiltered
(or even if filtered, only in a limited manner and
not fine filtered like beer intended to be sold in
bottles or cans). Para 29 of Excise Manual (Vol.
V, Chapter XI) notes that uncarbonated top
fermentation beer, which include draught beer
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[2025:RJ-JP:32330-DB] (16 of 20) [CW-7820/2007]
are racked directly from the fermenting vessel.
Thus, when the fermentation process of wort is
completed, it becomes an alcoholic liquor for
human consumption and there is no legal
impediment for subjecting beer to excise duty at
that stage. Therefore, the State has legislative
competence to levy excise duty on beer either
after the completion of the process of
fermentation and filtration, or after fermentation.
33. Section 29 (e)(i) of the U.P. Excise Act makes
it clear that in the case of beer manufactured in a
brewery, excise duty may be levied, by a rate
charged upon the quantity produced or issued
from the brewery or issued from a warehouse.
This means that in respect of beer that
undergoes the process of filtration, the exigibility
to excise duty will occur either at the end of the
filtration process when it is received in
storage/bottling tanks or when it is issued from
the brewery. In regard to draught beer drawn
directly from fermentation vessels, without
further processing or filtration, the exigibility to
excise duty will occur either at the end of
fermentation process or when it is issued from
the brewery."
Thus, it is apparent that excise duty would be applicable only
if beer is fit for human consumption and not otherwise.
OUR ANALYSIS AND FINDINGS:
24. From perusal of the aforesaid provisions of the Act, it is
apparent that the duty may be imposed on such articles, as the
State may prescribe, either for a specific local area or generally,
on any excisable article which is imported, exported, transported,
manufactured, cultivated or collected. Section 29 of Rajasthan
Excise Act, 1950, empowers the State Government to prescribe
such duty as may be levied in such one or more ways, as it may
notify in the Official Gazette.
25. Thus, beer as defined under the provisions of the Act of 1950
and Rules of 1972 reflected it to be one of the kinds of liquor
which is fermented and prepared to malt or grain with or without
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[2025:RJ-JP:32330-DB] (17 of 20) [CW-7820/2007]
addition of sugar. Such liquor naturally has to be consumable for
human consumption. Therefore, the liquor which is spurious or
unfit for consumption or spoiled either during manufacturing or
later on would not be allowed to be sold. Hence, in terms of Rule
41 of the Rules of 1972, it cannot be removed from the brewery
and in our view, therefore, the excise duty would not be payable
as it has to be destroyed. Provisions of Rule 41 of the Rules of
1972 stipulates prohibition from removing from the brewery any
beer without application of excise duty. Thus, it stipulates that the
beer which would be fit for human consumption can only be
removed after paying the excise duty. In the opinion of this court,
therefore, the duty would be payable, as held in "Mohan Meakin
Ltd." (supra) after a beer is prepared which is fit for human
consumption.
26. However, the court cannot close its eyes to the fact that the
beer which was manufactured by the petitioner and was fit for
human consumption could not be removed from the brewery on
account of action of suspension of license and seizure of factory by
the Excise Department. Their action has been declared illegal by
the Board of Revenue vide its judgment dated 7th May, 2003.
Hence, provisions of Section 28 and Rule 41 would have to be
read along with Section 29 and Rule 50 of the Act and Rules. To
understand as to whether the excise duty would be liable to be
paid by the petitioner on beer which was initially fit for human
consumption but was subsequently destroyed and thrown away on
account of becoming unfit for human consumption before being
removed from the brewery. The unusable and unfit beer unfit for
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human consumption cannot be treated as a final consumable
excise good. Excise duty is payable on an excise good which is
consumable and no take or excise duty, therefore, can be imposed
on such unused beer. If we look at this issue from another angle,
we would find that if the Excise Officer find any person
manufacturing illegal beer or any kind of liquor which is unfit for
human consumption, they are required to dispose of and destroy
such spurious liquor. The question arises whether the excise duty
would be payable from such an individual? In our opinion, ensuing
provision for punishment may be applied to such spurious illegal
liquor manufactured and no excise duty can be demanded from
him. Solely because the liquor which he has manufactured is non-
consumable it cannot be treated to be an excise good.
27. We may take notice of the fact that in relation to persons
manufacturing illegally IMFL wherever it is found, is destroyed as
has been laid down in the notification issued by the Department
dated 1st April, 2006, produced before us. Any excise duty which
has been paid is also refunded if consequently IMFL is destroyed.
Rule 50 of the Rules of 1972 deals with the same issue relating to
unused, unutilised excise goods which have become unfit for
human consumption.
28. Once the Department has adopted an approach with respect
to IMFL, different yardstick cannot be allowed with respect to beer
manufacturing. Accordingly, the contentions raised by the learned
counsel for the respondents are found to be without basis and we
agree with the submissions raised by the learned counsel for the
petitioner.
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29. Additionally, the argument raised by the petitioner regarding
arbitrary and malafide actions on the part of respondents in
issuing the impugned orders also appeals to us. The facts of the
present case when considered in its chronology, reveals that being
annoyed by the complaint made by the petitioner against one of
the Excise Guards, the Department has proceeded to suspend the
license of the petitioner and has also seized the factory premises.
The manufactured beer remained under seizure and while being
under custody of respondent Department turned unfit for human
consumption. The said action of suspension of license as well as
seizure was declared illegal by the Excise Commissioner in the
appeal filed by the petitioner. On a belated stage i.e. after six
years, the respondent Department raised the demand of excise
duty for the unsold beer which turned unfit for human
consumption due to illegal seizure. The subsequent action of
forced recovery clearly reflective of arbitrariness and malice in law
on the part of respondent Department, which is violative of Article
14 of the Constitution of India.
30. Therefore, we hold that the action of the respondents in
raising a demand for recovery of excise duty on unusable beer,
and in further imposing interest thereon, is arbitrary, illegal, and
unjustified, and is in contravention of the provisions of the Act and
Rules.
31. Consequently, we set aside the orders dated 01 st April, 2004
and 09th February, 2007 passed by the Excise Commissioner and
the Board of Revenue respectively, as well as the impugned
communications dated 17th April, 2008, 6th May, 2008, 15th
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January, 2009, 23rd January, 2009 and 3rd February, 2009, to the
extent they relate to the recovery of the said amount from the
petitioner.
32. With regard to the issue of refund, we note that the amount
in question was not voluntarily deposited by the petitioner.
Instead, the petitioner had challenged the demand before the
Board of Revenue and thereafter before this Court. Hence, the
requirement of filing a formal refund application is not applicable
in the present case, particularly in view of the fact that a part of
the recovery was stayed by this Court during the pendency of the
proceedings.
33. The respondents are, therefore, directed to refund the
recovered amount to the petitioner-Company, along with interest
@ 12% per annum, which was the prevailing interest rate at the
time of the recovery.
34. The Writ Petition is accordingly, allowed.
35. No costs.
36. Pending application(s), if any, stand disposed of.
(SANJEET PUROHIT),J (SANJEEV PRAKASH SHARMA),J
AMIT
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