An appeal cannot worsen an appellant’s position; the Supreme Court reaffirms the doctrine of no reformatio in peius

WHAT HAPPENED?

Saudi Arabian Airlines, authorised under Section 35 of the Finance Act, 1979 to collect Foreign Travel Tax (FTT) from international passengers, delayed depositing the tax on six occasions between 1994 and 1997 mostly citing security restrictions despite drafts being ready in time, and once due to an employee’s emergency leave. The adjudicating authority first imposed a modest penalty of Rs. 12,000. The airline appealed, and the matter was remanded for fresh adjudication.

On remand, the authority passed a fresh order enhancing the penalty to Rs. 71,29,140 over 590 times the original amount reasoning that the earlier penalty fell below the statutory minimum under Section 38(3) and needed correction. The airline’s challenges before the appellate authority, the revisional authority, and the Bombay High Court all failed; each held that an unqualified remand allowed the authority to re-examine and enhance the penalty strictly per the statute.

KEY LEGAL ISSUE

Can an appellate or remand forum enhance a penalty against a party to a position worse than what existed before it exercised its statutory right of appeal even if the original penalty was technically erroneous?

COURT’S DECISION

The Supreme Court held that all three forums below had erred. While allowing the appeal principally on the interpretation of Section 38(3), the bench went further to invoke the doctrine against reformatio in peius literally, “a change for the worse.” It explained that this doctrine forbids a higher forum from making an order worse for the very party who approached it, and reflects a rule of fair procedure rooted in natural justice and equality: exercising a legal remedy should never aggravate the position of the person availing it.

The bench relied on the Bombay High Court’s ruling in Jyoti Plastic Works Pvt. Ltd. v. Union of India (authored by Justice Bhuyan himself, drawing on Jawal Neco Ltd. v. Commissioner of Customs), and its own recent decision in Nagarajan v. State of Tamil Nadu, which had already endorsed the principle that an appellant cannot be placed worse off merely for filing an appeal.

Applying this, the Court held that the enhancement from Rs. 12,000 to over Rs. 71 lakhs occurred solely because the airline pursued its statutory remedies, and could not be sustained regardless of whether the original computation was erroneous. It set aside the enhanced penalty entirely, quashed the orders of the High Court and the revisional and appellate authorities, and directed a refund with 9% annual interest within three months.

KEY LEGAL PRINCIPLE / RATIO

Ratio: No litigant can be placed in a worse position solely for having availed a remedy provided by law. Where a party’s own appeal results in a remand, the forum on remand cannot use that opportunity to enhance the penalty or liability beyond what existed before the appeal was filed even if the original order was erroneous on some other ground. This is distinct from cases where the opposite party itself appeals or cross-objects seeking enhancement.

The discussion of correcting the erroneous computation on remand and the wider observations on natural justice are best read as reasoning supporting the ratio, rather than as independent holdings expanding the doctrine beyond tax and penalty proceedings.

Official judgment/order: Supreme Court order, uploaded 1 September 2026

This article has been researched and prepared by Sachin Meena, Legal Research Intern at LegalRath.

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