The retrospective effect of a government order specifying interest rates must be strictly construed, and higher interest rates can only be claimed for the actual due amount and not for amounts already paid.

By consent of both sides, the writ petition is taken up for final disposal.

2. The prayer in the writ petition is to quash the G.O.Ms.No.81 Prohibition and Excise Department, dated 5.4.2004 and the consequential order passed by the second respondent dated 28.11.2005.

3. The case of the petitioner is that he was the successful bidder of the arrack shop No.5 of Erode for the year 1981-82. However, due to the civil proceedings, he was not able to run the shop even for a single day, pursuant to which the notional loss was arrived at and the petitioner was fastened with the liability of Rs.3,59,784/-. According to the petitioner, he has paid the said amount in installments from 1988 to 1994 and settled the entire dues. However, the second respondent by proceeding dated 23.2.1995 directed the petitioner to pay a sum of Rs.1,34,556.20 as penal interest of 5% for the belated payment of the notional loss. The petitioner filed W.P.No.147 of 1997 and challenged the said order and this Court on 17.10.2001 set aside the said order and the matter was remanded on condition that the petitioner shall pay a sum of Rs.25,000/-. Petitioner submitted representation/objections pursuant to the remand. However, on 18.1.2002, again the penal interest was ordered to be paid. Petitioner accepted the said order by making the payment in installments. On 20.2.2004, the Taluk Excise Officer sent a letter and directed the petitioner to pay the arrears of interest of Rs.34,056/-which was also paid by 15.6.2005. The second respondent by letter dated 28.11.2005 demanded a further sum of Rs.1,95,064/-on the ground that the petitioner had to pay additional interest of 7% in addition to 5% penal interest already paid for the belated payment of notional loss in accordance with G.O.Ms.No.81 dated 5.4.2004. The said order was also passed without any notice to the petitioner. Aggrieved by the same, the petitioner challenged the said Government Order as well as the consequential demand in this writ petition by contending that the demand of 12% interest instead of 5% from the petitioner even though he has paid the entire amount at the rate of 5% interest is unreasonable and the G.O.Ms.No.81 dated 5.4.2004 cannot be applied after the payment of entire arrears, as early as on 15.6.2005.

4. On 14.3.2006, this Court granted interim stay and hence the petitioner has not paid any amount as demanded in the impugned demand notice dated 28.11.2005.

5. The second respondent filed counter affidavit stating that as per G.O.Ms.No.968 Home (Prohibition and Excise-II) Department, dated 28.8.1989, penalty at the rate of 5% was ordered to be collected for the belated payment of notional loss caused and accordingly penalty for the financial year from 1983-84 to 1993-94 was worked out as Rs.1,39,331/- which was re-calculated for the Fasli year as Rs.1,34,556/- and notice was issued to remit the said amount by proceeding dated 6.12.1994. Petitioner challenged the said order and obtained stay. While disposing of the writ petition, a sum of Rs.25,000/- was ordered to be deposited, which was remitted on 12.12.2001. Subsequently, the petitioner remitted 5% penalty amount in monthly installments till 15.6.2005. The necessity to make a further demand arose due to issuance of G.O.Ms.No.81 Prohibition and Excise Department, dated 5.4.2004 wherein the Government ordered to collect 12% interest from 12.5.1981 for the belated payments of notional loss. Since the petitioner had already remitted 5% interest, remaining 7% interest for the belated payment was calculated at Rs.1,95,064/-and orders have been issued on 28.11.2005 directing the petitioner to pay the amount. It is further stated that the second respondent is bound to implement the said Government order and therefore the demand notice was issued.

6. The learned counsel for the petitioner submitted that the impugned Government Order giving retrospective effect from 12.5.1981 is unreasonable, particularly when 5% interest was demande