ORDER D. V. Shylendra Kumar, J. Writ Petitioners are all industries and are basically consumers of power supplied by electricity supply companies and earlier by the State Electricity Board. Writ petitioners had resorted to indigenous generation of power to overcome the shortage, in view of the situations that the electricity supply companies were unable to meet the demands of consumption of power by the petitioners and such power was being captivity consumed by the petitioners in their own industrial units. 2. Generation of power even for captive consumption is an activity which attracts liability for payment of what is known as ‘electricity tax’, charged under the provisions of Section 3 of the Karnataka Electricity (Taxation on Consumption) Act, 1959 (for short ‘the Act’). The Act had been amended by the Karnataka Ordinance No 8 of 2003, which came to be succeeded by the Karnataka Act No. 5 of 2004. The Act was given retrospective effect from date on which the Ordinace was promulgated i.e., from 16-10-2003 and the levy in terms of the amended Act was in force during the period from 16-10-2003 to 1-10-2004. 3. Many industries who were generating power for their own consumption and for the benefit of their sister concerns, had questioned the legality of the ordinance as well as the Act in a batch of writ petitions and this Court in terms of the order dated 22-12-2006 in WP No. 50822 of 2003 and connected matters, disposed of the writ petitions holding that while the Ordinance was not in consonance with the Constitutional and legal provisions, upheld the validity of the Act. 4. The present writ petitions are a sequel to the upholding of the Act and as the demand for payment of electricity tax in terms of the amended Act came to be affirmed by this Court by upholding the validity of the Act. 5. The petitioners, who had paid a part of the tax liability under the amended Act, were, thereupon called to pay the balance, which having remained unpaid, obviously became arrears and while so demanding, the State Government called upon the petitioners to pay the arrears with interest at the rate of 24% p.a. on the outstanding arrears for the period in question in terms of the impugned demand notices dated 30-5-2007, 25-6-2007, 22-5-2007 and 28-6-2007 in WP Nos. 9718 of 2007, 14384 of 2007, 14386 of 2007 and 15008 of 2007 respectively. 6. The present writ petitions are limited to the questioning of the legality of the demand in calling upon the petitioners to pay the arrears with interest and being aggrieved by the levy of interest, contending that though the petitioners were bona fide pursuing the litigation and were successful in getting over the liability under the Ordinance, were not successful in getting over the liability under the Act and that is the reason for arrears. 7. Several contentions are urged in support of the writ petitions, inter alia, contending that the State government has no power to demand interest, as it is not duly supported by a valid notification in terms of the provisions of Section 7 of the Act, which provides for recovery of arrears with interest, that assuming that there is such a power, the demand is unreasonable, as it is not justified to call upon the petitioners to pay the arrears with interest and that too at such a high rate as 24% p.a., when the petitioners were bona fide litigating before this Court to ventilate their legitimate grievance and to workout their rights; that the demand for payment of interest at 24% p.a. is in any view of the matter is an unreasonable demand and therefore the demand in so far as levy of interest at the rate of 24% p.a. is concerned, is requried to be quashed. 8. On notice, the respondents have entered appearance through Ms. Asha M Kumbaragerimath, Learned Government Pleader and statement of objections has also been filed. 9. I have heard Sri S. N. Murthy, learned Senior Counsel appearing for the petitioners and Ms. Asha M. Kumbaragerimath, learned Government Pleader, appearing for respondents. 10. 8. On notice, the respondents have entered appearance through Ms. Asha M Kumbaragerimath, Learned Government Pleader and statement of objections has also been filed. 9. I have heard Sri S. N. Murthy, learned Senior Counsel appearing for the petitioners and Ms. Asha M. Kumbaragerimath, learned Government Pleader, appearing for respondents. 10. While Sri S.N. Murthy, learned Counsel for the petitioners would reiterate the grounds urged in support of the petitions, would also submit that the levy of interest at the rate of 24% p.a. virtually partakes the character of penalty; that the Act in terms of Section 7 no doubt enables the government to fix the rate of interest on the outstanding arrears and while the maximum permitted under Section 7 stood at 9% p.a., which was later enhanced to 15% p.a., and now stands upto 24% p.a., it is for the state government to have notified the precise rate within this upper limit at which rate interest is to be levied and collected; that in the absence of any notification in terms of Section 7, no interest can be levied at all and therefore the impugned demands are bad in law. 11. Section 7 of the Act reads as under: 7. Recoveries: Any sum due on account of electricity tax, if not paid at the time and in the manner prescribed, shall be deemed to be in arrears and thereupon such interest not exceeding twenty-four percent per annum which the State Government may by general or special order fix, shall be payable on such sum and the sum, together with any interest thereon, shall be recoverable either through a civil Court or as an arrear of land revenue- (i) if the sum was payable under sub-section (1) of Section 4 either from the consumer or subject to the proviso to the said sub-section from the licencee, at the option of the State government; (ii) if the sum was payable under sub-section (3) of Section 4, either from the consumer or from the person supplying energy free of charge, at the option of the State Government or from the person who generates energy for his own consumption. 12. Countering such submissions, Ms. 12. Countering such submissions, Ms. Asha M. Kumbaragerimath, learned Government Pleader, would submit that when once the demand for interest is provided for under the Act itself and when the Act itself mentions the rate of interest to be payable upto 24% p.a., the authorities are justified in recovering arrears with interest at 24% p.a., and therefore there is no need for interference. 13. Learned Government Pleader also placed before the Court a notification dated 24-10-1978 issued under Section 7 of the Act, indicating the rate of interest for the purpose of Section 7 to be at 15% p.a. However, the learned Government pleader is unable to come up with any subsequent notification/s fixing any higher rate of interest issued for the purpose of Section 7 of the Act. The notification dated 24-10-1978, when it was issued, perhaps the higher or maximum rate of interest fixed under the section itself was 15%, and on such premise an argument is built by Sri S.N. Murthy, learned Senior Counsel for the petitioners contending that automatically fixing the maximum permitted rate of interest under Section 7 is not a reasonable or fair exercise of power conferred under Section 7, the notification should have left discretion to the authority concerned to levy interest upto 15% at the relevant point of time and now 24%, but could have fixed the minimum and in between a discretion should have been given to the authority to fix the rate of interest. 14. This argument no doubt is on the basis that the levy of interest at either 15% p.a. earlier or 24% p.a. as of now, is more in the nature of penalty and in levying penalty while an opportunity should be given to the persons who suffer penalty to be heard and such opportunity will not be useful or effective unless a discretion is given to the authority concerned to either waive interest totally or to reduce the rate of interest from the upper limit. 15. 15. This submission is opposed by the learned Government Pleader, contending that the Section provides for levy of interest on the arrears, which is more in the nature of a compensatory amount and not in the nature of a penalty; that the rate of interest is also not unreasonable or so high as to characterize that as a penalty than in the nature of compensatory amount, for non-payment within the permitted time. 16. I have bestowed my anxious consideration to the arguments addressed at the Bar. While it is true that the petitioners have not deliberately delayed any payment of tax due by them and it may also be true that they were bona fide pursuing the litigation before this Court and it became definite about the liability for payment of tax only after the disposal of the writ petitioners in terms of the order dated 22-12-2006, the circumstance or such conduct by itself may not, in my opinion, absolve the petitioners of the liability for payment of interest under Section 7 of the Act. I say so for the reason that in Section 7 the legislature has consciously used the word ‘interest’ and ‘on arrears’. The words are suggestive of the compensatory nature payment for not paying within the permitted time. An amount becomes an arrear only because of non-payment within the stipulated time. Section in fact implies a fiction to make it deemed arrears, if not paid in the prescribed manner. When such being the situation, if the amount is only a compensatory amount, it cannot be accepted that it is in the nature of penalty. The percentage of interest being altered from time to time is also indicative that it is more in the nature of a compensatory levy for not realizing the revenue in time and not in the nature of a penalty making it a deterrent on the part of the defaulting assessee to avoid recurrence of such situations. 17. In so far as the argument that fixing the maximum permitted rate of interest in terms of Section 7 of the Act concrned, while it is true that the Section only provides an upper limit, no lower limit is prescribed. Discretion is given only to the state government to fix a rate upto that limit. If the notification fixes any rate above the upper limit, it becomes ultra vires the Section. Discretion is given only to the state government to fix a rate upto that limit. If the notification fixes any rate above the upper limit, it becomes ultra vires the Section. So long as the notification is one fixing the rate of interest within the upper limit, it cannot be said that it has in any way violated or has transgressed the limit prescribed under Section 7 of the Act. The argument that a discretion should have been left to the authority concerned to levy and demand the interest, cannot be accepted for the reason that the legislature consciously has not intended any discretion being given to the officer, but the discretion is only to the State Government while fixing the rate of interest in general. Therefore no fault can be found with the notification issued under Section 7, even when the State Government had fixed the maximum rate of interest as permitted under Section 7 at the relevant point of time. 18. However, in so far as the argument of the learned Government Pleader appearing for the respondents, that Section 7 enabling the State government to levey interest upto a maximum of 24% and that the notification issued in the year 1978 fixing the rate of interest at 15% p.a. when the maximum rate of interest was 15% p.a. and therefore, it should be read in consonace with such notification, the interest now should be taken to be at 24% p.a. as the maximum now permitted under Section of the Act is 24% p.a., is an argument which cannot be accepted for the reason that a notification of the nature placed before the Court by the learned Government Pleader dated 24-10-1978 and issued by the Government, cannot be one which can be understood by logic or by a process of reasoning to interpret the notification as one which automatically enhances the rate of interest as and when the section undergoes changes. The section is very clear that for stipulating the rate of interest, a notification should be issued by the State government. The section is very clear that for stipulating the rate of interest, a notification should be issued by the State government. Therefore, while the notification dated 24-10-1978 can be relied upon by the learned Government Pleader to contend that a levy of interest upto 15% p.a. on the outstanding arrears is justified on the basis of this notification read with Section 7 of the Act, the argument that on the basis of this very notification and as the Section now stands permitted the maximum rate of interest at 24%, it justifies interest be levied on the arrears at 24% p.a. cannot be accepted, for the simple reason that the State Government has not issued a notification like the earlier one fixing the rate of interest to be at 24% p.a.. The learned Government Pleader has not disputed that there is no other notification fixing a higher rate of interest that 15%, a demand upto 15% alone cane be justified and not at any higher rate of interest. 19. Therefore, these writ petitions succeed in part. The impugned demands in so far as they relates to levy of interest over and above 15% p.a. stands quashed by issue of a writ of certiorari. Respondents are directed to collect the outstanding arrears with interest only upto 15% p.a. and not over and above this rate. 20. Rule made absolute. Writ petitions are allowed in part. 21. Sri S.N. Murthy, learned Senior Counsel for the petitioners, submits that during the pendency of these writ petitions before this Court, pursuant to the interim directions issued by this Court, certain amount has already been deposited towards the interest, which alone was the subject matter of these writ petitions, and the said amount may be adjusted and the petitioners apprised of the balance amount payable. The respondents to give credit to the amount already deposited/paid by the petitioners and call upon them to pay the balance amount of interest paybale by the petitioners as indicated in this order.