The Supreme Court on Tuesday (August 25) upheld the Commissioner of Customs order of classifying the Mumbai Port Trust as a 'custodian' under the Customs Act for the purpose of paying duty on 'pilfered goods' i.e., loss or damage to stock in a warehouse or to cargo in transit.

The Court said that regardless of the fact that the Mumbai Port trust is governed by the Major Port Trusts Act, 1963, any liability for the pilfered goods would be payable by the port trust as a custodian under the Customs Act.

“Since the importer of the goods is not liable to pay the duty leviable on pilfered goods except when such goods are restored to the importer, the obligation is cast on the person approved by the Principal Commissioner of Customs or Commissioner of Customs as notified under sub-section (1) of Section 45 of the Customs Act to pay the duty on such pilfered goods.”, observed a bench of Justice BV Nagarathna and Justice Manmohan, while setting aside that part of the Bombay High Court's judgment which held the Custom's notification declaring the Respondent-Mumbai Port Trust as a custodian to be illegal.

The High Court said that the Mumbai Port Trust, being a statutory body constituted under the Major Port Trusts Act, 1963, could not be brought within the liability contemplated under Section 45 (3) of the Customs Act. The provision entitles the department to seek recovery of customs duty from the custodian under in respect of imported goods allegedly pilfered while in its custody.

“...we are of the view that the Commissioner of Customs (Import) was fully justified in issuing the Notification dated 11.10.2000 approving the Mumbai Port Trust as the custodian under Section 45(1) of the Customs Act. The High Court, therefore, was not justified in holding that the Commissioner lacked the jurisdiction to issue the said Notification and in quashing the same.”, the Court said, while upholding the validity of the notification declaring Mumbai Port trust as a custodian under the Customs Act.

The dispute arose from show-cause-cum-demand notices issued by the Customs authorities to the Port Trust between 1996 and 2000, seeking recovery of customs duty under Section 45(3) of the Customs Act in respect of imported goods allegedly pilfered while in its custody.

The Respondent-Mumbai Port Trust challenged the duty demands before the Bombay High Court, which ultimately held that Section 45(1) permitted approval only of a person who was otherwise responsible for the custody of imported goods and that the provision could not override the statutory framework governing the Port Trust i.e., Major Port Trusts Act, 1963.

The Union government challenged the decision before the Supreme Court.

Disagreeing with the High Court's approach, the judgment authored by Justice Nagarathna rejected the Respondent-port trust argument that about creation of an additional liability on them, which was otherwise not intended under the Customs Act, as the liability for the loss of goods is covered under the Major Port Trusts Act.

The Court noted that while the Major Port Trusts Act contains provisions concerning loss, destruction or deterioration, pilferage is specifically addressed under the Customs Act. Clarifying the distinction, the Court observed:

“If it is a case of loss of goods simpliciter then the provisions of the Major Port Trusts Act would apply having regard to the saving clause under sub-section (1) of Section 45 of the Act. But, as pilferage is not specifically dealt with under the provisions of the Major Port Trusts Act and is dealt with only under the Customs Act and duty is imposed under sub-section (3) of Section 45 of the said Act, then, the savings clause under sub-section (1) of Section 45 would not apply. Consequently, the non obstante clause under sub-section (3) of Section 45 is used as a legislative device to meet such a circumstance. Therefore, any loss of goods other than pilferage is not a subject matter of payment of customs duty under Section 45 of the Customs Act. However, if it is a case of pilferage of goods, then under sub-section (3) read with subsection (1) of the Customs Act, duty is indeed payable by the person approved in terms of sub-section (1) of the Section 45 of the said Act.”

“In the instant case, since Notification dated 11.10.2000 was issued by the Commissioner of Customs precisely for the purpose of collection of customs duty in respect of pilfered goods as stipulated under sub-section (3), it cannot be found fault with merely because the custody of the goods is otherwise governed by the Major Port Trusts Act.”, the Court added.

Consequently, the Court upheld the notification issued by the Customs Commissioner approving the Mumbai Port Trust as custodian under Section 45(1) of the Customs Act. The Bombay High Court's judgment quashing the notification was set aside.

Headnote

Customs Act, 1962 – Sections 13, 45(1), 45(2), and 45(3) read with Major Port Trusts Act, 1963 – Sections 42 and 43 – Liability to pay customs duty on pilfered goods – Notification approving Port Trust as custodian – Validity – Overriding effect of Section 45(3) - The saving clause under Section 45(1) of the Customs Act ("save as otherwise provided in any law for the time being in force") does not bar the Commissioner of Customs from notifying and approving a Major Port Trust as a "custodian" of imported goods unloaded in a customs area - The liability of a Port Trust under Section 43 of the Major Port Trusts Act is fundamentally distinct from the liability created under Section 45(3) of the Customs Act - The former regulates the civil, compensatory liability of the Board as a bailee towards the owner of the goods under Sections 151, 152, and 161 of the Indian Contract Act, 1872, and is conditional upon the issuance of a receipt under Section 42(2) - In contrast, Section 45(3) imposes an independent and absolute statutory liability on the approved custodian to pay customs duty to the Revenue in respect of goods pilfered while in its custody, safeguarding the Revenue since Section 13 absolves the importer from such liability - The non obstante clause in Section 45(3) ("notwithstanding anything contained in any law for the time being in force") overrides the provisions of the Major Port Trusts Act as well as the saving clause in Section 45(1) - the Notification dated 11.10.2000 issued by the Commissioner of Customs (Import) approving Mumbai Port Trust as the custodian under Section 45(1) is valid and intra vires - liability under Section 45(3) cannot be fastened retrospectively for pilferage that occurred prior to the date of approval/notification under Section 45(1). [Paras 3 – 7]

Interpretation of Statutes – Non Obstante Clause vs. Saving Clause - A non obstante clause operates to set aside as no longer valid anything contained in relevant existing laws that is inconsistent with the new enactment - It cannot cut down clear terms of an enactment, and must be understood to operate according to its plain grammatical construction or as clarifying the whole position incorporated ex abundanti cautela - The words "any law for the time being in force" include provisions within the very enactment in which those words appear. [Relied on Aswini Kumar Ghosh v. Arabinda Bose, AIR 1952 SC 369; Dominion of India v. Shrinbai A. Irani, AIR 1954 SC 596; Paras 6, 7]

Cause Title: Union of India & Ors. v. The Board of Trustees of the Port of Bombay

Citation : 2026 LiveLaw (SC) 863

Click here to download order

Appearance:

For Appellant(s) : Mr. N Venkataraman, A.S.G. Mr. Gurmeet Singh Makker, AOR Mr. Raman Yadav, Adv. Mr. Arijit Prasad, Adv. Mr. V C Bharathi, Adv. Mr. S A Haseeb, Adv. Mr. Padmesh Mishra, Adv.

For Respondent(s) :Mr. Rakesh Khanna, Sr. Adv. Mr. Abhishek Puri, Adv. Mr. Sahil Grewal, Adv. Ms. Surabhi Gupta, Adv. Mrs. Reeta Dewan Puri, Adv. Mr. P. N. Puri, AOR