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PETITIONER: MOHAN MEAKINS BREWERIES LTD. DALIGANJLUCKNOW ETC.

       Vs.

RESPONDENT: CONTROLLER OF WEIGHTS AND MEASURES,U.P. LUCKNOW & ORS.

DATE OF JUDGMENT31/01/1989

BENCH: SINGH, K.N. (J) BENCH: SINGH, K.N. (J) KULDIP SINGH (J)

CITATION:  1989 AIR  959            1989 SCR  (1) 375  1989 SCC  (2) 405        JT 1989 (1)   253  1989 SCALE  (1)201

ACT:     U.P.  Weights  and  Measures  (Enforcement)  Act,  1959: Section   2   (jj)--’Use  in  transaction   for   trade   or commerce’--Vats used for storing liquor--Notice  issued  for getting   vats  verified,  calibrated  and  stamped--Whether valid Act--Whether applicable to manufacturer of liquor.

HEADNOTE:     The appellants, were engaged in manufacture and sale  of liquor, under licence granted to them under the U.P.  Excise Act.  They installed vats in their Breweries’  premises  for the storage of liquor. The liquor stored in vats was bottled and  sold  under the supervision of officers of  the  Excise Department.  The  Inspector of Weights and  Measures  issued notices to them for getting their vats verified,  calibrated and  stamped  in accordance with the provisions of  the  U.P Weights and Measures (Enforcement) Act, 1959. The appellants filed appeals against the notices issued by the Inspector on the ground that the provisions of the Act were not  applica- ble  to the appellants’ undertaking, manufacturing  alcohol. The  appeals were dismissed by the Respondent-Controller  of Weights  and measures. The appellants filed  writ  petitions before the High Court challenging the orders of the respond- ents.     The High Court dismissed the petitions holding that  the provisions of the Act and the Notifications issued  thereun- der  were applicable to the manufacturers of liquor  in  the distillery,  and the notices issued by the  respondents  for the calibration of the storage vats were legal and valid.     Aggrieved, the appellants filed appeals by special leave in this Court contending that the High Court committed error in  holding that the storage vats were required to be  cali- brated under the provisions of the Act, that the  provisions of the Act would apply if measures were used for transaction in  trade and commerce, but keeping alcohol in storage  vats did  not  amount to transactions in trade or  commerce,  and that  unless the storage vats were used in  transaction  for trade and 376 commerce, the provisions of the Act were not attracted. Dismissing the appeals,

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   HELD: 1.1 Under the definition clause in s. 2(jj) of the U.P.  Weights  and  Measures (Enforcement)  Act,  1959,  the legislature has given an artificial extended meaning to  the expression  "use in transaction for trade or commerce".  Ac- cording  to the definition it means use for the purposes  of determining  or declaring the quantity of anything in  terms of  measurement  of length or capacity or weight  in  or  in connection  with  the cls. (a) and  (b)  mentioned  therein. Clause  (b) refers to any assessment of royalty; toll;  duty or other dues. Thus, according to the extended meaning,  the provisions  of the Act would be attracted if the  assessment of  royalty; toll; duty or dues is to be determined  on  the basis of the quantity of anything in terms of measurement of length, area, volume or weight. [379C-E]     1.2 There is no dispute that for the purposes of  deter- mining excise duty on the liquor produced by a manufacturer, the  assessment  is made on the basis of the volume  of  the liquor  produced and sold. Since volume of the  liquor  pro- duced and stored in vats is connected with the assessment of excise duty, it is covered by the expression "use in  trans- action for trade or commerce". [379E-F]     1.3 Ordinarily, the storage of alcohol in vats by itself may  not  amount to transaction for trade  or  commerce  but under the extended meaning of the expression under s. 2(jj), even  the storage of liquor in vats would be covered by  the expression  "use  in transaction for trade or  commerce"  as volume  of the liquor is necessary to be determined in  con- nection with the assessment of excise duty. [379F-G]     1.4 The alcohol stored in the storage vats is essential- ly for the purpose of sale and there is no dispute that  the appellants manufacture and store alcohol in storage vats for the purpose of sale, and the officers of the Excise  Depart- ment  measure storage vats as prescribed by Rule 751 of  the Excise  Manual,  Volume 1. Since the volume of  the  storage vats  is measured by the officers of the Excise  Department, the  provisions of the Act for the purpose of sale would  be applicable to the storage vats also. [380F-G]     By  Notification dated 19.8.1961 the provisions  of  the Act  were made applicable to an undertaking engaged  in  the manufacture and sale of alcohol with effect from October  1, 1961. Any doubts about the 377 applicability of the provisions of the Act stood removed  by the subsequent Notifications dated May 17, 1962 and July 18, 1967, making the provisions of the Act applicable to all the undertakings  in so far as they relate to units of  capacity in respect of those classes of undertakings to which the Act has been made applicable. [380E, H; 381A]     Therefore,  having  regard to the above facts  the  High Court  was right in holding that the storage vats were  cov- ered by the provisions of the Act. [381B]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No.  506  of 1989 Etc.     From  the  Judgment  and Order dated  5.12.1986  of  the Allahabad High Court in C.M.W.P. No. 207 of 1980. Dr. L.M. Singhvi and R..B. Mehrotra for the Appellants. Anil Dev Singh and Mrs. S. Dikshit for the Respondents. The Judgment of the Court was delivered by SINGH, J. Special leave granted.     The  appellants are engaged in the business of  manufac- ture  and  sale of Indian made foreign  liquor  and  country

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liquor,  under licence granted to them under the  Provisions of  U.P. Excise Act. The appellants have installed  vats  in their  Breweries’  premises for the storage of  liquor.  The liquor stored in vats is bottled and sold under the supervi- sion of officers of the Excise Department. The Inspector  of Weights and Measures issued notices to the appellants  call- ing  upon  them to get their vats verified,  calibrated  and stamped  in  accordance  with the  provisions  of  the  U.P. Weights  and Measures (Enforcement) Act, 1959,  (hereinafter referred  to as the Act). The appellants  preferred  appeals against  the  notice issued by the Inspector on  the  ground that  the  provision of the Act were not applicable  to  the appellants’  undertaking,  manufacturing  alcohol  but   the appeal was dismissed by the Controller of Weights and  Meas- ures. The appellants made petitions under Article 226 of the Constitution before the High Court of Allahabad  challenging the  orders  of the respondents. Before the High  Court  the appellants  contended  that the provisions of the  Act  were attracted  to the appellants’ undertaking only at the  stage of sale and anything done in the process of manufacture  and storage of liquor could not be 378 subjected to the provisions of the Act and the notice issued by  the  Inspector of Weights and Measures was  without  any authority of law. It was further urged that the  calibration of  vats storing liquor was not necessary and the  direction issued by the respondents was without any authority of  law. Similar  petitions were filed by the manufacturers  of  Syn- thetic  Rubber and Campher. All the three sets of  petitions were disposed of by a Division Bench of the High Court by  a common judgment and order dated December 5, 1985. The  Divi- sion Bench allowed the petitions filed by the  Manufacturers of  Synthetic Rubber and Campher but it dismissed the  peti- tions  filed by the manufacturers of liquor on  the  finding that  the provisions of the Act and the Notification  issued thereunder are applicable to the manufacturers of liquor  in the distillery and the notices issued by the respondents for the  calibration of the storage vats were legal  and  valid. Aggrieved  the appellants have preferred the  present  peti- tions for special leave to appeal.     Dr.  L.M.  Singhvi, learned counsel for  the  appellants urged  that the High Court committed error in  holding  that the  storage  vats are required to be calibrated  under  the provisions  of the Act. He added that the provisions of  the Act  would  apply if measures are used  for  transaction  in trade and commerce, but keeping alcohol in storage vats does not  amount  to transactions in trade or  commerce.  Learned counsel emphasised that unless the storage vats are used  in transaction for trade and commerce the provisions of the Act would  not be attracted. In order to appreciate the  conten- tion,  we would briefly refer to the relevant provisions  of the Act.     Section  7  of  the Act imposes prohibition  on  use  of weights  and measures other than standard weights and  meas- ures.  It  provides that no unit of mass or  measure,  other than  the standard weights or measures shall be used in  any transaction for trade or commerce or any dealing or contract or for any work to be done or goods to be sold or delivered. Section 10 further imposes prohibition on the sale or use of unstamped  commercial  or measuring instrument in  trade  or commerce  unless  it  has been verified  or  reverified  and stamped in the prescribed manner by an Inspector with  stamp of verification. These provisions impose legislative  prohi- bition  that no weight or measure or weighing  or  measuring instrument shall be used or be kept for use in any  transac-

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tion for trade or commerce or for being sold, unless it  has been  verified  by the Inspector of the  Department  in  the prescribed manner. Section 2(jj) defines the expression "use in transaction for trade or commerce " which is as follows: 379               "2(jj)  use in transaction for trade  or  com-               merce--with  its  grammatical  variation   and               cognate  expressions, means use for  the  pur-               poses of determining or declaring the quantity               of anything in terms of measurement of length,               area,  volume,  capacity or weight  in  or  in               connection with               (a)  any  contract, whether by  way  of  sale,               purchase, exchange or otherwise, or               (b)  any assessment of royalty; toll; duty  or               other dues’ or               (c)  the assessment of any work done or  serv-               ices  rendered, otherwise than in relation  to               research or scientific studies or in individu-               al households for house-holds purposes"     Under  the aforesaid definition clause  the  legislature has  given an artificial extended meaning to the  expression "use in transaction for trade or commerce". According to the definition  it means use for the purposes of determining  or declaring  the quantity of anything in terms of  measurement of length or capacity or weight in or in connection with the clauses (a) and (b) mentioned therein. Clause (b) refers  to any assessment of royalty; toil; duty or other dues. Accord- ing  to  the extended meaning given by the  legislature  the provisions  of the Act would be attracted if the  assessment of  royalty; toll; duty or dues is to be determined  on  the basis of the quantity of anything in terms of measurement of length, area, volium or weight. there is no dispute that for the  purposes of determining excise duty on the liquor  pro- duced by a manufacturer the assessment is made on the  basis of the volume of the liquor produced and sold by the  appel- lants.  Since  volume of the liquor produced and  stored  in vats is connected with the assessment of excise duty, it  is covered  by the expression "use in transaction for trade  or commerce".  Ordinarily,  the storage of alcohol in  vats  by itself  may not amount to transaction for trade or  commerce but  under  the  extended meaning of  the  expression  under Section  2(jj) even the storage of liquor in vats  would  be covered  by the expression "use in transaction for trade  or commerce" as volume of the liquor is necessary to be  deter- mined  in connection with the assessment of excise duty.  We are, therefore, in agreement with the view taken by the High Court.     The  learned counsel for the appellants urged  that  the High  Court  failed to consider the effect  of  Notification dated  28.8.1961  which made the provisions of the  Act  ap- plicable  to  an undertaking engaged in the  manufacture  of alcohol  at the stage of sale only. The Notification  is  as under: 380               NOTIFICATION               "KHADYA  TATHA RASAD VIBHAG  NOTIFICATION  NO.               UPWM-1(3)-28-2401/XXIX-D-524-58  dated  August               19,  1961, published in U.P. Gazette, Part  I,               dated 25th August, 1961, page 1537.               In  exercise of the powers conferred  by  sub-               section (3) of Section 1 of the Uttar  Pradesh               Weights  and Measures (Enforcement) Act,  1959               (U.P.  Act  No. V of 1959),  the  Governor  of               Uttar Pradesh is pleased to appoint the  first

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             day of October, 1961, as the date on which the               provisions  of  the said Act shall  come  into               force in the whole of Uttar Pradesh in respect               of:               (a) Undertaking engaged in the manufacture  of               alcohol  in so far as they undertake the  sale               of alcohol; and               (b)  Departments  of Government in so  far  as               they undertake the levy of duties of excise on               alcohol."     By the aforesaid Notification the provisions of the  Act were made applicable to an undertaking engaged in the  manu- facture  and  sale of alcohol with effect  from  October  1, 1961.  Emphasis  was  laid by the learned  counsel  for  the appellants  on the expression "in so far as  they  undertake the  sale of alcohol". He urged that provisions of  the  Act occurring  in  the  aforesaid Notification  have  been  made applicable  to the appellants’ undertaking at the  point  of sale  of alcohol. Before the sale of alcohol the  provisions of  the Act are not attracted and as such the  storage  vats cannot  be required to be calibrated under the  law.  Having given  our anxious consideration to the question, we do  not find any merit in the submission. The alcohol stored in  the storage  vats  is essentially for the purpose  of  sale  and there  is  no dispute that the  appellants  manufacture  and store  alcohol  in storage vats for the  purposes  of  sale. There is further no dispute that the officers of the  Excise Department  measure storage vats as prescribed by Rule 75  1 of  the  Excise Mannual, Volume 1. Since the volume  of  the storage  vats  is  measured by the officers  of  the  Excise Department,  the  provisions of the Act for the  purpose  of sale  would be applicable to the storage vats also.  But  if there be any doubt about the applicability of the provisions of the Act the same stood removed by the subsequent  Notifi- cations  dated May 17, 1962 and July 18, 1967.  Under  these Notifications  the  provisions  of the Act  have  been  made applicable to all the under- 381 takings  in  so far as they relate to units of  capacity  in respect  of those clauses of undertakings to which  the  Act has  been made applicable. Having regard to these facts  the High  Court, in our opinion, was fight in holding  that  the storage vats are covered by the provisions of the Act.     Learned  counsel  for  the appellants  then  urged  that excise duty is assessed at the point of sale as held by  the High  Court of Allahabad in M/s Mohan Meakins  Breweries  v. State of U.P., [1979] U.P. Tax Cases 1048, therefore, provi- sions  of the Act are applicable to the issue vats only  and no calibration is necessary for the storage vats. We find no merit in the submission. In the aforesaid decision the  High Court held that under the provisions of the U .P. Excise Act excise  duty  is a charge essentially on the  production  or manufacture  of an excisable article but for  administrative convenience it is imposed at a stage subsequent to the stage of  manufacture. This itself would make it clear  that  pro- duced  material is the subject matter of excise  duty,  even though  the assessment of duty is done at the point of  sale for convenience sake. The storage of alcohol is required  to be  measured by the officers of the Excise Department  under the provisions of the Excise Manual to ensure that there  is no  pilferage  or unauthorised removal of  alcohol  as  that would adversely affect the assessment of duty. Storage  vats are intimately connected with the assessment of excise duty, therefore  provisions of the Act are applicable  to  storage vats also.

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   We are, therefore, of the opinion that no exception  can be  taken to the view taken by the High Court.  The  appeals fail  and the same are accordingly dismissed. There will  be no order as to costs. N.P.V.                                        Appeals   dis- missed. 382