TaxTMI 
TaxTMI 
05 Sep 2026 
A remedy available in law should not aggravate the situation of the person who avails the remedy - It is not only a procedural guarantee but is also a principle of equity. Distinction between 'failure to pay the tax' and 'delay in the payment of the tax' is important held by SC in context of Foreign Travel Tax (FTT). The Rule is applicable in context of other tax laws also which have provisions about 'due date', 'payment within due date', 'interest for delays', penalty and prosecution etc.
Provisions considered:
Finance Act, 1979 RELATED TO Foreign Travel Tax (FTT)
- Section 35 - Foreign Travel Tax (FTT in short)
- Section 38 - Penalties
Foreign Travel Tax Rules, 1979 (FTT Rules in short)
Latin maxim considered and its opposite applied
Maxim 'reformatio in peius' - change towards or for the worse.
Opposite of above maxim applied by SC
'no reformatio in peius' or
'prohibition of reformatio in peius'
M/s. Saudi Arabian Airlines Versus Union Of India & Ors.- 2026 (9) TMI 81 - Supreme Court
{Arising from judgment and order of Bombay High Court in Writ Petition No. 3269 of 2004 (M/s. Saudi Arabian Airlines Vs. Union of India) dated 09.08.2010 - not reported.
On the same provisions other judgments on similar lines:
Iran National Airlines Versus UOI - 2006 (3) TMI 756 - BOMBAY HIGH COURT
MALAYSIAN AIRLINES Versus UNION OF INDIA - 2010 (8) TMI 786 - BOMBAY HIGH COURT
NORTH WEST AIRLINES Versus UNION OF INDIA - 2006 (3) TMI 183 - BOMBAY HIGH COURT
Cases cited:
MATHURAM AGRAWAL Versus STATE OF MADHYA PRADESH - 1999 (10) TMI 125 - Supreme Court
JK. Industries Ltd. Versus Chief Inspector of Factories & Boilers - 1996 (9) TMI 503 - Supreme Court
Gujarat Travancore Agency Versus Commissioner of Income-Tax, Kerala - 1989 (5) TMI 1 - Supreme Court
Hindustan Steel Limited Versus State Of Orissa - 1969 (8) TMI 31 - Supreme Court
Iran National Airlines Versus UOI - 2006 (3) TMI 756 - BOMBAY HIGH COURT
Per author- relevant judgment not referred:
Commissioner of Income-Tax, AP Versus M. Chandra Sekhar - 1984 (12) TMI 1 - Supreme Court
Brief facts:
The matter relates to levy of Foreign Travel Tax ( FTT) a levy on foreign travels.
Appellant in the course of its business collected FTT from the passengers going abroad in its aircrafts in accordance with the Finance Act and the FTT Rules. The FTT so collected was to be deposited within prescribed time in treasury.
There were delays of few days to few months in depositing of FTT in some of months. In some of months demand draft (DD) was purchased within due date but for some administrative reason there was delay in depositing of DD.
From paragraph 6 of the judgment- analysis of facts:
Delay of few days:
One day delayed in the months of July, 1995, December 1996 and November, 1997.
3 days for the month of August, 1994
11 days delay for the month of April, 1996.
63 days for the month of December, 1995.
In 5 out of the 6 instances of delay, the demand drafts were purchased by the appellant before the due dates for making the payment but there were delays in depositing the demand drafts by 1 day, 3 days, 11 days and 63 days respectively, as noted above.
Total short payment of FTT in 7 cases was an aggregate amount of Rs. 14,000.00 out of which Rs. 12,000.00 has been held to be barred by limitation by revisionary authority ( as per noting in other paragraph)
As such, only Rs. 2,000.00 was payable by the appellant.
Paragraph 7 analysed -
14 separate show cause notices (SCN) were issued on different dates means 2 SCN for each month one for interest and another for penalty under section 38 for delayed deposit of FTT.
As usual appellant / airlines replied to each of SCN and pleaded that delay was due to technical reasons and it be condoned.
Adjudicating Authority (AA) on further examination found that there were delays in 19 cases ( months). In some months FTT was partly paid timely and partly belatedly as noted in paragraph 8 and 9. Therefore, AA increased demand for interest and also levied penalty vide order dt.14.06.1999.
On preferring first appeal the appellate authority remanded back matter to AA vide order dt. 24.11.1999 and directed AA to look in the issue afresh after granting proper opportunity of personal hearing to the appellant ( means airlines) .
As noted in paragraph 11 of judgment, vide the de novo order-in-original dated 08.08.2001, the adjudicating authority directed the appellant (airlines) to pay the following amounts:
(i) Rs. 14,000.00 on account of short payment of FTT;
(ii) interest of Rs. 2,58,630.00 for late payment of FTT to the extent of Rs. 3,56,45,700.00;
(iii) interest at the rate of 20 percent on the short payment of Rs. 14,000.00 till actual payment of the said amount;
(iv) penalty of Rs. 71,29,140.00 was imposed under Section 38(3) of the Finance Act in respect of 6 cases of late payment of FTT;
(v) penalty of Rs. 2,800.00 in respect of 7 cases of short payment of FTT; and
(vi) penalty of Rs. 47,000.00 was imposed for 3 cases of late submission of monthly return.
Appeal against denovo adjudication:
As noted in paragraph 12 of the judgment the appellate authority i.e. Commissioner of Customs (Appeal) in short CCA upheld the de novo order-in-original by rejecting the appeal vide the appellate order dated 09.01.2003. The CCA took view that the AA has considered all aspects of case including levy of penalty and that minimum penalty is mandatory confirmed the order of AA.
Petition of revision u.s. 129 of Customs Act before the Government of India, Ministry of Finance, Department of Revenue (RA) was filed by Airlines.
In the revision order dt. 29.10.2004, the revisional authority accepted the contention of the appellant that in 5 cases the show cause notices were issued beyond the prescribed time limit of 6 months under Rule 7 of the FTT Rules. Accordingly, the demand of interest for those 5 cases were set aside on the ground of limitation.
But RA did not accept the other contentions of the appellant including on the question of penalty. It opined that under Section 38(3) of the Finance Act, there is no discretion with regard to the minimum quantum of penalty which is a statutory compulsion. Once there is a delay, imposition of penalty is automatic. Insofar enhancing the quantum of penalty is concerned, Central Government was of the view that in the de novo order-in-original, the adjudicating authority had only imposed the minimum prescribed penalty under the statute which was overlooked through inadvertence in the initial order-in-original. However, on the aspect of demand of interest of Rs.2,58,630.00 on account of delayed payment of FTT amounting to Rs.3,56,45,700.00, the revisional authority remanded the case back to the adjudicating authority for the limited purpose of ascertaining whether the show cause notices for demanding interest on the delayed payment of the aforesaid amount of FTT were issued within the prescribed time limit under Rule 7 of the 1979 Rules and thereafter to decide the same in accordance with law.
Challenge of Revision order before High Court:
In the Writ Petition (WP) filed against the Revision Order the basic thrust of the writ petition pertained to imposition of penalty, rather enhancement of the same in the de novo order-in-original.
Contentions as raised before lower authorities including RA were raised and it was pleaded that no penalty was leviable. The High Court dismissed the WP vide the judgment and order dated 09.08.2010 against which appeal was filed before the Supreme Court.
Non-payment vis a vis delayed payment of tax:
The core submission made by counsel Mr. Dinesh was that Section 38(3) deals with a situation where there is absolute non-payment of the tax i.e. failure to pay the tax. Belated payment of tax but before issuance of the show cause notice cannot be treated as non-payment of tax or failure to pay the tax.
The minor delays were explained as discussed earlier.
Adverting to Section 35A of the Finance Act, it was submitted that the aforesaid provision deals with a situation such as the one in the present case. Section 35A provides for levy of interest for default in payment of FTT. For such default, the minimum interest rate is 20 per cent and the maximum is 30 per cent per annum.
Detailed arguments were made from both sides relying on different competing provisions, amendments, procedures for SCN, hearing, levy of penalty and its quantum and different earlier rulings in different but relevant contentions as per counsels. Provisions and ruling in relation to TDS and deposit of TDS and penalty u.s. 271C of Income Tax Act,1961 for delay in deposit of TDS were also argued and considered.
Judgment of the Supreme Court in case of US Technologies International Private Limited holding that for mere delay in deposit of TDS, it cannot be said that there was no tax deducted and hence penalty was not leviable.
This ruling was applied by the Supreme Court in holding that no penalty is leviable.
Per author- relevant judgment was not referred:
Commissioner of Income-Tax, AP Versus M. Chandra Sekhar - 1984 (12) TMI 1 - Supreme Court
In this case it was held that levy of interest for late filing of return can be considered as extension of time to file return and therefore, penalty was not leviable.
This judgment was available when case was argued before the High Court, however, it seems that this was not referred and general rule that on payment of interest due date is extended was not pressed. Otherwise, perhaps the matter could be settled at earlier stage.
In this case on restoration and adjudication de nova demand was raised. On this aspect the Supreme Court vide paragraph 51 -56 which are reproduced below with highlights added:
"51. On this aspect also the appellate authority, the revisional authority as well as the High Court fell in grave error. We have already held that no penalty is liable to be imposed on the appellant but that is besides the point. The question is, whether a litigant can be worse off by approaching the appellate forum as provided under the law or by approaching a court of law?
52. The High Court of Judicature at Bombay (already referred to hereinabove as 'the High Court') in Jyoti Plastic Works Pvt. Ltd., Jai Plastics, N.D. Patel Versus Union of India - 2020 (11) TMI 156 - BOMBAY HIGH COURT (authored by one of us Justice Ujjal Bhuyan) had considered this aspect in detail. Referring to the latin maxim reformatio in peius which means a change towards the worse, the High Court observed that a person should not be placed in a worse position as a result of filing an appeal. The High Court held as follows:
"40. In this connection we may refer to the maxim reformatio in peius. It is a latin phrase meaning a change towards the worse, i.e., a change for the worse. As a legal expression it means that a lower court judgment is amended by a higher court into a worse one for those appealing it. In many jurisdictions, this practice is forbidden ensuring that an appellant cannot be placed in a worse position as a result of filing an appeal. When the above phrase is prefixed by the words 'no' or 'prohibition', which would render the maxim as no reformatio in peius or prohibition of reformatio in peius, it would denote a principle of procedure as per which using a remedy available in law should not aggravate the situation of the person who avails the remedy. In other words, a person should not be placed in a worse position as a result of filing an appeal. No reformatio in peius or prohibition of reformatio in peius is a part of fair procedure and, thus, by extension can also be construed as part of natural justice. It is not only a procedural guarantee but is also a principle of equity.
53. The High Court referred to the decisions of the Madras High Court as well as of this Court in M/s. Jaswal Neco Ltd. Versus Commissioner of Customs, Visakhapatnam - 2015 (8) TMI 243 - Supreme Court emphasizing this point holding that an appellant cannot be worse off by reason of filing an appeal.
54. In a recent decision of this Court in Nagarajan Vs. State of Tamil Nadu (2025) 8 SCC 331, after referring to and endorsing the decision of the High Court in Jyoti Plastic Works Pvt. Ltd., this Court held that no appellant by filing an appeal can be worse off than what he was prior to filing the appeal.
55. Thus, having regard to the entire conspectus of the facts of the case and the discussions made above, we are of the view that penalty imposed on the appellant for late deposit of FTT in 6 instances cannot be sustained. The same is accordingly set aside. Consequently, impugned order of the High Court dated 09.08.2010, the revisional order dated 29.10.2004, order-in-appeal dated 09.01.2003 and the de novo order-in-original dated 08.08.2001 qua imposition of the penalty on the appellant for late deposit of FTT on 6 occasions are set aside and quashed. Any amount paid by the appellant as part of the above penalty shall be refunded by the respondents to the appellant with interest at the rate of 9 percent per annum within 3 months from today. Bank guarantee furnished by the appellant would also stand discharged.
56. Appeal is accordingly allowed. However, there shall be no order as to cost."
Observation and views of author:
With due respect to concerned authorities as well as counsels author feels that this case involved un-necessary litigation led by government authorities in view of facts like:
- Nominal amounts involved in cases of delays in view of overall FTT paid,
- Nominal delays involved of few days and in few months only
- Interest levied and / or paid this can be considered as time statutorily extended.
- The period of events during which information technology services were not available in banking facilities.
- Substantial compliance and minor lapses due to reasons beyond control.
- Increasing liability in course of appeal and restoration was not at all justified.