THE HON’BLE SRI JUSTICE C.V.RAMULU W.P.Nos.16804 & 17311 of 2008 COMMON ORDER: In these two writ petitions, common questions of law and fact arises for consideration, therefore they are being disposed of by this common order. The facts as noticed in W.P.No.16804 of 2008 are as under: Petitioner is a company incorporated under the Companies Act, 1956 having its registered and administrative office at Plot No.2, Maitrivanam, Ameerpet, Hyderabad. According to the petitioner, it has engaged in manufacturing and trading of bulk drugs, intermediaries, besides other. One of the petitioner’s unit is availing electricity supply from first respondent vide service connection bearing No.MDK 634 under H.T. category. Petitioner’s unit is situated at Gundlamachnoor village, Hathnoora mandal, Medak district, which is within the operation circle of third respondent. Petitioner’s unit was sanctioned with a contracted maximum demand of 1250 KVA with a connected load of 4833 HP at KV voltage of supply vide agreement entered into with third respondent dated 13.7.2006. Subsequently, on the request of the petitioner, an additional load of CMD 270 KVA to the existing load of CMD 1250 KVA totaling to 1520 KVA with a connected load of 4833 HP at 11 KV voltage of supply through dedicated feeder was sanctioned to the said service connection by third respondent vide letter dated 18.1.2008. Petitioner has paid the development charges and consumption deposit for the release of said additional load vide letter dated 8.4.2008 and an agreement was also concluded for availing the said additional load of 270 KVA totaling to 1520 KV by the petitioner company with third respondent on 24.4.2008. As per the existing tariff rates mentioned in Annexure-D of Tariff order dated 20.3.2008 issued by APERC applicable for the financial year 2008-2009, the respondents should charge for the supply of electricity to the petitioner’s service connection bearing No.MDK 634 at the rate of 195 per KVA towards demand charges and at the rate of Rs.3.25 per each unit consumed towards energy charges. As per the said tariff order, if the HT consumer availing supply at voltage of 6.6 KV or below instead of 11 KV voltage, when the contracted demand is between 70 KVA to 1500 KVA, then the voltage surcharge will be imposed at 12% extra over normal rate on demand charges and 10% extra over normal rate on energy charges. Petitioner’s u nit has been availing supply of 11 KV specified voltage and at no point of time, they have availed the supply at voltage of 6.6 KVA or below it for levying voltage surcharge in the monthly consumption bills. While that being so, the monthly bill for the month of June, 2008 for an amount of Rs.30,33,069/- was issued levying voltage surcharge and claiming an additional amount of Rs.3,56,410/- on such illegal levy. According to the petitioner, the monthly bill for the month of June, 2008 in respect of petitioner’s unit should have been; a) Demand charges = 1520 KVA x 195 = Rs. 2,96,400-00 40 KVA x 390 = Rs. 15,600-00 b) Energy charges = 800007 units x 3.25 = Rs.26,00,022-75 c) Electricity duty = 800007 units x 0.06 = Rs. 48,000-00 d) Customer charges Rs. 750-00 --------------------- Rs.29,60,773-17 Less incentive Rs. 2,84,114-18 Net payable Rs.26,76,658-99 However, petitioner company deposited the said amount of Rs.3,56,410/- under protest with the respondents towards voltage surcharge illegally imposed in June, 2008 monthly bill and the said amount shall be refunded by the respondents or be adjusted in the future bills together with interest at 12% per annum. The respondents filed their counter denying the allegations and stated that as per tariff rates approved by APERC for the financial year 2008-09, the applicable rates to the H.T. 11 KV consumers whose CMD is between 70 KVA and 1500 KVA and avails the supply at 11 KV common feeder are as follows: Demand charges Rs.195/KVA/Per month. Penal Demand charges Rs.195 x 2/KVA/Per Month (for exceeded CMD) Energy charges Rs.3.25/KWH The applicable tariff rates in respect of 11 KV consumers who violates the tariff conditions and avails the maximum demand more than 1500 KVA on a 11 KV common feeder are as follows: Demand chares Rs.195/- plus 12% of Rs.195/KVA/ Per Month. Penal Demand charges (Rs.195 x 2) plus 12% of (Rs.195 x 2)/KVA/ Per month (for exceeded CMD). Energy charges Rs.3.25 plus 10% of Rs.3.25/KWH. It is further stated that the petitioner has drawn 1570.50 KVA as against the maximum permissible limit of 1500 KVA during the consumption month of July, 2008 on 11 KV common feeder. Hence, it is clearly proved that the petitioner has availed supply at 11 KV instead of 33 KV specified level as their demand drawn is 1570.5 KVA. Thus, the respondents are justified in leyving and collecting voltage surcharge from the petitioner. The learned counsel for petitioner strenuously contended that under Schedule of Retail Tariff Rates and Terms and Conditions in respect of the four distribution companies for the financial year 2008- 09, the additional charges for maximum demand in excess of the contracted demand, if in any month the recorded maximum demand of the consumer exceeds his contracted demand (with licensee), that portion of the demand in excess of the contracted demand will be billed at twice the normal charges. The learned counsel, while drawing attention of the court to the Bill dated 26.6.2008 issued by the respondents, which are as under: Description Rate KVA/Units Amount Rs. Demand Charges Normal 218.4 1250 273000.00 Demand Charges Penal 436.8 310 135408.00 Energy Charges 357.5 800007 2860025.02 Electricity duty Colony charges 6.00 800007 48000.42 L&F charges FSA charges stated that the respondents cannot levy voltage charges at the rate of 12% extra over normal rate on voltage charges and 10% extra over normal rate on energy charges. No doubt, there was extra consumption of 270 KVA for the month of June, 2008, the respondents having collected twice the normal charges against the excess demand, they could not have imposed penalty as voltage charge at 12% and extra over normal rate and 10% extra over normal rate on energy charges. In this regard, the learned counsel relied upon clause-B (Voltage Surcharge) of Schedule of Retail Tariff Rates and Terms and Conditions, which are statutory in nature. It is further submitted that the very clause-B in its nature requires an adjudicatory process as per the language imported into it. No notice or no adjudicatory process was followed, therefore the impugned order to the extent of imposing voltage surcharge as a penalty requires to be set aside. The learned counsel for petitioner further submits that even assuming that the petitioner is liable to pay the voltage surcharge as per clause-B of the Tariff Rates, the very language imported into Clause-B which reads as under: “B. VOLTAGE SURCHARGE H.T. consumers who are now getting supply at voltage different from the declared voltages and who want to continue taking supply at the same voltage will be charged as per the rates indicated below: S.No. Contracted demand Voltage at Voltage at Rates with licensee and which supply which consumer % Extra over normal rate other sources should be made is availing supply Demand Energy Charge/KVA Charge/Kwh KVA KV KV 1. 70 to 1500 11 6.6 or below 12% 10% 2. 1501 to 5000 33 11 or below 12% 10% 3. Above 5000 132 or 220 66 or below 12% 10% Note: The FSA will be extra as applicable. For HT consumer availing supply through independent feeders. S.No. Contracted demand Voltage at Voltage at Rates with DISCOM and which supply which consumer % Extra over normal rate other sources should be made is availing supply Demand Energy Charge/KVA Charge/Kwh KVA KV KV 1. 70 to 2500 11 6.6 or below 12% 10% 2. 2501 to 10,000 33 11 or below 12% 10% 3. Above 10,000 132 or 220 66 or below 12% 10% Note: The FSA will be extra as applicable.” makes it clear that it is only an adjudicatory process and the penalty leviable has to be decided. Any penalty is leviable only when there is failure on the part of consumer to follow tariff rates or failure to consume either less or more than permitted KVA and not otherwise. To decide whether the petitioner was justified in drawing excess than contracted demand or not is to be examined by the authority concerned. Since it is imposition of penalty, principles of natural justice has to be followed, as noticed in the above judgments. In support of his case, the learned counsel for petitioner relied upon the judgments in THE ASSOCIATED CEMENT COMPANIES LTD. v. ANDHRA PRADESH STATE ELECTRICITY BOARD, HYDERABAD[1], DIRECTOR OF ENFORCEMENT v. M/S MCT M. CORPORATION PVT. LTD.[2], J.K.SYNTHETICS LIMITED v. COMMERCIAL TAX OFFICER[3] and the judgment rendered by this Court in W.P.No.13278 of 2004 dated 23.8.2004. In ASSOCIATED CEMENT COMPANIES LTD. (2 supra), it was held as under: “In one of the cases i. e. A. P. Paper Mills it has been specifically alleged that in spite of the fact that the petitioner has installed a transformer but the respondent-Board could not lay down the lines as there was some injunction issued against the Board when the work for laying the lines started still, although the Board is not in a position to supply the power at high voltage still the appellant is compelled to pay the higher rate as he is not receiving power at the high voltage indicated in the notification. 15. So far these aspects of the matter are concerned admittedly they were not before the High Court. Originally what was challenged in the High Court was the power of the Board to unilaterally alter the conditions of supply. This question about from what date the higher rates should be charged and as to whether grant of six months' time to complete the preparation for receiving the supply at a-higher voltage is reasonable or not were not before the High Court (single Judge) nor before the Division Bench and in fact, facts in respect of each petitioner on the basis of which these questions could be considered are also not before us although an attempt has been made by some of the appellants by additional affidavits and documents to place it before us. But it is not sufficient nor it is proper to decide these questions. After all the respondent-Board is an authority under a Statute and if the appellants are able to satisfy the authority that the time of six months in the context of the circumstances when this notification was issued was not reasonable it is open to the Board to consider from what date to enforce the enhanced rates for supply at lower voltage taking into consideration all the cases and also keeping in view the circumstances in connection with installation of transformers and laying the lines which have come during the course of these hearings. It is also open to the Board that in the special facts of any particular case to provide a separate date for enforcement of the higher rate. But all these questions cannot be decided in the scope of the present appeals." In DIRECTOR OF ENFORCEMENT v. M/S MCT M. CORPORATION PVT. LTD (4 supra) at paragraph 7, it was held as under: “The proceedings under Section 23 (l) (a) of FERA, 1947 are 'adjudicatory' in nature and character and are not "criminal proceedings". The officers of the Enforcement Directorate and other administrative authorities are expressly empowered by the Act to 'adjudicate' only. Indeed they have to act 'judicially' and follow the rules of natural justice to the extent applicable but, they are not 'judges' of the "criminal courts" trying an 'accused' for commission of an offence, as understood in the general context. They perform quasi-judicial functions and do not act as 'courts' but only as 'administrators' and 'adjudicators'. In the proceedings before them, they do not try 'an accused' for commission of "any crime" (not merely an offence) but determine the liability of the contravenor for the breach of his 'obligations' imposed under the Act. They impose 'penalty' for the breach of the "civil obligations" laid down under the Act and not impose any 'sentence' for the commission of an offence. The expression 'penalty' is a word of wide significance. Sometimes, it means recovery of an amount as a penal measure even in civil proceedings. An exaction which is not compensatory in character is also termed as a 'penalty'. When penalty is imposed by an adjudicating officer, it is done so in "adjudicatory proceedings" and not by way of fine as a result of a 'prosecution' of an 'accused' for commission of an 'offence' in a criminal court. Therefore, merely because 'penalty' clause exists in Section 23 (l) (a), the nature of the proceedings under that section is not changed from 'adjudicatory' to 'criminal' prosecution. An order made by an adjudicating authority under the Act is not that of conviction but of determination of the breach of the civil obligation by the offender”. In J.K.SYNTHETICS LIMITED v. COMMERCIAL TAX OFFICER (3 supra), it was held as under: “Before we proceed further we must emphasise that penalty provisions in a statute have to be strictly construed and that is why we have pointed out earlier that the considerations which may weigh with the authority as well as the Court in construing penal provisions would be different from those which would weigh in construing a provision providing for payment of interest on unpaid amount of tax which ought to have been paid. Section 3, read with S. 5 of the Act, is the charging provision whereas the rest of the provisions provide the machinery for the levy and collection of the tax. In order to ensure prompt collection of the tax due certain penal provisions are made to deal with erring dealers and defaulters and these provisions being penal in nature would have to be construed strictly. But the machinery provisions need not be strictly construed. The machinery provisions must be so construed as would enable smooth and effective collection of the tax from the dealers liable to pay tax under the statute. Section 11b provides for levy of interest on failure of the dealer to pay tax due under the Act and within the time allowed. Should this provision be strictly construed or should it receive a broad and liberal construction, is a question which we will have to consider in determining the sweep of the said provision. We will do so at the appropriate stage but for the present we may notice the thrust of this Court's decision in the case of Associated Cement Co. Ltd. (AIR 1981 SC 1887). Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Company's case, (AIR 1981 SC 1887) that if the Revenue's contention is accepted it leads to conflicts and creates certain anomalies which could never have been intended by the legislature.” In the judgment rendered by this Court in W.P.No.13278 of 2004 dated 23.8.2004, it was held as under: “Having considered the submissions made and also on perusal of the material, it is seen that there is no serious dispute in regard to the earlier agreement and the terms and conditions entered into between the parties for supply at 11 KV voltage and the impugned order only comes thereafter on the ground that the supply has to be only through 33 KV and further the said supply is not through the dedicated feeder and these f acts are come to know subsequently. On a reading of the entire impugned order, it is seen that the petitioner has not been given any notice or opportunity or any enquiry is held in respect of the grounds on which the revised demand is sought to be made. Having regard to the fact that there is a written contract between the parties for supply at 11 KV, any variation therein in regard to supply and the demand for any such charges would vary with the existing terms and conditions, even if the petitioner is not entitled to as per the Tariff order or otherwise, he is entitled to a notice and opportunity Since, no such opportunity has been provided and no enquiry is conducted, the impugned demand is totally in the teeth of the principles of natural justice”. Whereas the learned counsel for respondents relied upon the judgment in HYDERABAD ENGINEERING INDUSTRIES LIMITED v. ANDHRA PRADESH STATE ELECTRICITY BOARD[4], wherein it was held as under: “On the merits of the contention various controversies were raised in respect of the calculations and mathematics of calculating the transmission loss. An attempt was also made on behalf of petitioners to suggest that the way of calculations suggested by the respondent-Board does not appear to be correct but it is not disputed and it cannot be disputed that where power travels through the transmission lines there is always some loss of power. It is also a fact which could not be disputed that loss of power will be related to the quantum of power which travels through the transmission line and the distance through which power has to travel. It is also a fact which could not be disputed that if power is transmitted at high voltage the loss during transmission. is less as compared to the loss when the power is transmitted at a low voltage and in view of these accepted scientific facts it is not necessary for us to go into the calculations and mathematical part of it to find out as to whether the calculations submitted by the Board are correct or those suggested on behalf of the petitioners are correct. The fact remains that lower the voltage higher the transmission loss higher the voltage lower the transmission loss and it is also not in dispute that these appellants are high tension consumers consuming substantial power and therefore when power travels through transmission lines even for short distances it is not smaller quantities of power but heavy quantities of power are transmitted and in this view of the matter it could not be said that the policy decision taken by the Board to supply these high tension consumer power at high voltage so that transmission loss and transformation loss should be minimised could not be said to be any wrong decision or a decision not supported by scientific reasoning.” I have given my earnest consideration to the respective submissions made by the learned counsel on either side and perused the impugned order and other material made available on record. The sum and substance of the argument advanced by the learned counsel for the respondents is that when the contracted demand is between 70 KVA and 1500 KVA, the voltage at which supply should be availed is 11 KVA. Therefore, the rates 12% extra over normal rate and 10% extra over energy charges are liable to be paid. Likewise, if the contracted demand is excess and between 1501 and 5000, the voltage at which supply should be availed is 33 KV and voltage at which consumer is availing is 11 KV or below and the extra over normal rate is 12% and energy charge is 10%. Since the contracted demand was 1500 and since he exhausted the contracted demand and drawn 1540 KVA, the voltage at which supply should have been is 33 KV. Since the petitioner has availed extra contracted demand over and above 1500 KVA permitted, there will be loss of energy transmission on the 11 KV wires. Therefore, the petitioner is liable to pay voltage surcharge. Since he got supply at voltage different from the declared voltage, which was intending to continue taking supply over and above 1500 KVA. Apart from that the portion of demand in excess of contracted demand will be billed at twice normal charges. Therefore, the simple question needs to be answer in this writ petition is whether the language imported into Clause-B Voltage Surcharge that – H.T. Consumers who are now getting supply at voltage different from the declared voltages and who want to continue taking supply at the same voltage will be charged as per the rates indicated therein can be construed as it has inclusive of an adjudicatory process for deciding as to whether a particular consumer is liable for voltage surcharge or not. The purport of Clause-B is as to collecting voltage surcharge apart from collecting penalty twice the normal charges on the energy consumed in excess of the contracted demand. The submission made by the learned counsel for petitioners that collecting voltage surcharge is in the nature of levying penalty and no liability as to penalty can be decided unilaterally and such penalty can be demanded only after hearing the affected party effectively in view of the decisions relied upon by the learned counsel in this regard, particularly in DIRECTOR OF ENFORCEMENT v. M/S MCT M. CORPORATION PVT. LTD (4 supra) and the judgment rendered by this Court in W.P.No.13278 of 2004 dated 23.8.2004. Firstly, the surcharge cannot be termed as a penalty. The surcharge in the present case is collected in view of the fact that more than 1500 KVA energy is transmitted on 11 KV lines and thus, it had resulted in wastage of energy in the transmission. Simply because the language used in Clause-B (Voltage Surcharge) does not inspire the confidence of the Court to interpret that such a language imported would necessarily imply that before collecting such voltage surcharge, the affected party must be heard and thus, the proceedings take the shape/colour of quasi-judicial nature. The contention of the learned counsel for petitioner that tax laws, particularly tax collecting by way of penalty like one on hand, shall be imposed only after putting the petitioner on notice and not otherwise also liable to be repelled. Further, it appears, as rightly pointed by the learned counsel for the respondents and as held in the decision of the Apex Court in HYDERABAD ENGINEERING INDUSTRIES LIMITED (4 supra) that it is a fact which could not be disputed that loss of power will be related to the quantum of power which travels through the transmission line and the distance through which power has to travel. It is also a fact which could not be disputed that if power is transmitted at high voltage the loss during transmission is less as compared to the loss when the power is transmitted at a low voltage and in view of these accepted scientific facts, it is clear that lower the voltage higher the transmission loss higher the voltage lower the transmission loss. Thus, whether high voltage or low voltage is taken, the loss of energy is bound to occur during transmission. Therefore, the Board has taken a policy decision for minimizing the loss caused to it by way of collecting voltage surcharge. The meaning of ‘surcharge’ as per CHAMBERS DICTIONARY is ‘an over charge’, ‘an extra charge’, ‘an excessive load’, ‘an over load condition’ etc. Here is a case of overloading 11 KV lines. When overloading in excess of the contracted demand is admitted over 11 KV lines, the voltage surcharge is automatic and is liable to be charged at the rate fixed under the tariff, which admittedly has a statutory force. Therefore, in the peculiar facts and circumstances of the case, the voltage surcharge collected by the respondents on the ground that the petitioner has consumed excess load over and above 1500 KVA over 11 KV lines cannot be said to be a fine or penalty imposed. The surcharge is collected for overloading the 11 KV lines, which ultimately resulted in loss of energy in transmission. Under those circumstances, the decisions relied upon by the learned counsel for petitioner have no relevance to the facts of the present case. For all the above