Authority: Supreme Court of India, Civil Appeal No. 1052 of 2013

Order Date: 01 September 2026

Case Overview

  • Parties: Appellant – Saudi Arabian Airlines (air carrier licensed to operate flights to/from India); Respondents – Union of India and others (including Commissioner of Customs, Department of Revenue).
  • Nature: Appeal against High Court judgment and order dated 09 August 2010 in Writ Petition No. 3269 of 2004, which dismissed the writ and upheld penalty under Section 38(3) of the Finance Act, 1979 (as amended 1994) for delayed payment of Foreign Travel Tax (FTT).
  • Background: The airline collected FTT from passengers but deposited the tax late on six occasions (delays ranging from 1 to 63 days). The adjudicating authority imposed interest of Rs 2,58,630 and penalties totalling Rs 71,29,140 (including Rs 12,000 minimum penalty in the original order, later enhanced on remand). The appellant contended that the penalty provision applies only to non‑payment, not to delay, and that Rule 11 caps customs officer penalty at Rs 5,000.
  • Lower authority findings: The Deputy Commissioner of Customs confirmed short payment of Rs 14,000, interest on late payment, and imposed penalties under Section 38(3) and Rule 11. The appellate authority upheld the de novo order; the revisional authority set aside interest on five notices for limitation but upheld penalty; the High Court dismissed the writ, holding that delay equals failure to pay and that penalty is mandatory.

Final Outcome

  • The Supreme Court quashed and set aside the High Court judgment, the revisional order dated 29 Oct 2004, the appellate order dated 09 Jan 2003, and the de novo order dated 08 Aug 2001 insofar as they imposed penalty for the six delayed FTT payments.
  • The Court held that the penalty under Section 38(3) is not applicable to mere delay; the appropriate provision is Section 38(4) together with Rules 4 and 9, which allow discretion and possible condonation of delay.
  • Consequently, the penalty of Rs 71,29,140 is cancelled; any amount already paid by the airline as penalty shall be refunded by the respondents with interest at 9 % per annum within three months of the order.
  • The bank guarantee furnished by the airline is discharged. No order as to costs.

Topics: Penalty Law, Foreign Travel Tax, Aviation Tax Compliance