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.

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

Citation : 2026 LiveLaw (SC) 863

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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