The Supreme Court of India has ruled that the Commissioner of Customs possesses the statutory authority under Section 45(1) of the Customs Act, 1962, to approve a Major Port Trust as a custodian of a customs area and fasten liability for customs duty on pilfered goods under Section 45(3). A Bench comprising Justice B.V. Nagarathna and Justice Manmohan set aside a 2009 Bombay High Court judgment to the extent that it had quashed a notification issued by the Commissioner of Customs (Import) declaring the Mumbai Port Trust as an approved custodian. However, the apex court left undisturbed the setting aside of duty demands raised for the period prior to the notification date, as the appellants did not press those claims.
Background of the Case
The respondent, the Board of Trustees of the Port of Bombay, is a Major Port Trust constituted under the Major Port Trusts Act, 1963. Between June 1996 and May 2000, the Assistant Commissioner of Customs issued four show cause-cum-demand notices to the Port Trust, seeking recovery of customs duty under Section 45(3) of the Customs Act for goods pilfered while in its custody during 1996–2000. Adjudicating officers confirmed these demands through orders-in-original passed between November 1997 and May 2001.
In the interregnum, on October 11, 2000, the Commissioner of Customs (Import), Mumbai, issued a Notification and Public Notice under Section 8 and Section 45(1) of the Customs Act. The notification declared the Mumbai Port Trust (“MbPT”) area as a “customs area” and approved MbPT as the “custodian” responsible for statutory duties and liabilities prescribed under Sections 45(2) and 45(3) of the Customs Act.
MbPT challenged the orders-in-original before the Commissioner of Customs (Appeals), who dismissed the appeals on July 30, 2002. Thereafter, MbPT filed a writ petition before the Bombay High Court challenging both the appellate order and the Notification dated October 11, 2000. On July 28, 2009, the Bombay High Court allowed the writ petition, holding that under Section 45(1) of the Customs Act, duty recovery for pilfered goods could only be made from a person approved by the Commissioner of Customs, and not from a statutory body whose custody of goods arises under the Major Port Trusts Act. Consequently, the High Court set aside the duty demand orders and quashed the October 11, 2000 Notification as being without jurisdiction and ultra vires Section 45(1). Aggrieved, the Union of India and customs authorities appealed to the Supreme Court.
Arguments of the Parties
Counsel Sri V. Chandrashekara Bharati, appearing for the Union of India, argued that the saving clause in Section 45(1) of the Customs Act, “save as otherwise provided in any law for the time being in force”, does not exclude the Commissioner from approving a person in whose custody imported goods remain simply because another statute, such as the Major Port Trusts Act, also places goods in that person’s custody. The appellants submitted that approval under Section 45(1) makes the approved custodian liable for customs duty on pilfered goods under Section 45(3) irrespective of other statutory custody arrangements. Regarding the pre-notification demand notices, the appellants fairly conceded that in the absence of approval under Section 45(1) during the period prior to October 11, 2000, demands for that period could not be sustained.
Senior Counsel Sri Rakesh Khanna, appearing for the Port Trust, contended that MbPT’s custody of imported goods flows directly from the Major Port Trusts Act. It was argued that the Commissioner had no power to approve MbPT under Section 45(1) in the first place, as its custody was already governed by another law, and therefore Section 45(3) could not independently create liability against it. In the alternative, MbPT submitted that since the demands pertained to a period prior to the Notification dated October 11, 2000, no customs duty for pilfered goods could be collected for the pre-notification period.
The Court’s Analysis
The Supreme Court examined the interplay between the Customs Act, 1962, and the Major Port Trusts Act, 1963, beginning with the legal distinction between a saving clause and a non-obstante clause.
The Court adverted to precedent on non-obstante clauses, referencing Chief Justice Patanjali Shashtri’s observation in Aswini Kumar Ghosh vs. Arabinda Bose (1952) that “it should first be ascertained what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment.”
The Bench also referred to Dominion of India vs. Shrinbai A. Irani (1954), where it was observed that “…the non obstante clause need not necessarily and always be co-extensive with the operative part, so as to have the effect of cutting down the clear terms of an enactment. If the words of the enactment are clear and are capable of only one interpretation on a plain and grammatical construction of the words thereof, a non obstante clause cannot cut down that construction and restrict the scope of its operation. In such cases the non obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the legislature by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment. …”
Analyzing the statutory scheme, the Supreme Court noted that while Section 13 of the Customs Act absolves an importer from paying customs duty on goods pilfered after unloading and before clearance, Section 45(3) (inserted w.e.f. May 26, 1995) casts that duty liability onto the approved custodian.
The Court pointed out that Section 45(3) begins with the non-obstante clause “notwithstanding anything contained in any law for the time being in force”. The Court observed:
“The source, nature and object of the two liabilities are, clearly, distinct. While the Board may remain liable as a bailee to compensate the owner for the loss occasioned by its negligence, Section 45(3) independently fastens upon the approved custodian the obligation to make good the customs duty which, by virtue of Section 13, cannot be recovered from the importer.”
“The Major Port Trusts Act regulates the Board’s civil liability in respect of the goods entrusted to it, whereas Section 45(3) of the Customs Act safeguards the Revenue by ensuring that customs duty on pilfered goods does not go unrealised merely because the importer stands absolved under Section 13.”
The Court explained that under Sections 42 and 43 of the Major Port Trusts Act, the Port Board’s liability for loss, destruction, or deterioration of goods is that of a bailee under the Indian Contract Act, 1872, and is conditional upon issuing a receipt and receiving statutory notice. In contrast, Section 45(3) of the Customs Act creates an independent, absolute statutory revenue liability on the approved custodian for pilfered goods.
Furthermore, the Court highlighted that under Section 23 of the Customs Act, pilferage is treated distinctly from loss or destruction simpliciter. While general loss or destruction may be governed by the Major Port Trusts Act under the saving clause of Section 45(1), pilferage is specifically governed by Section 13 and Section 45(3) of the Customs Act. Therefore, the saving clause in Section 45(1) does not preclude the Commissioner of Customs from notifying and approving the Port Trust as a custodian for the purpose of recovering customs duty on pilfered goods.
Decision of the Court
The Supreme Court concluded that the Commissioner of Customs (Import) was fully justified in issuing the Notification dated October 11, 2000, approving the Mumbai Port Trust as the custodian under Section 45(1) of the Customs Act.
Accordingly, the Supreme Court held:
- The Notification dated October 11, 2000, issued by the Commissioner of Customs (Import) under Section 45(1) of the Customs Act, is valid.
- The High Court judgment dated July 28, 2009, to the extent it held otherwise and quashed the notification, is set aside.
- The quashing of the show cause-cum-demand notices dated June 18, 1996, April 2, 1997, April 28, 1997, and May 24, 2000, pertaining to the period prior to October 11, 2000, was not interfered with, as the appellants did not press those demands due to the absence of prior approval under Section 45(1).
The appeal was disposed of with no order as to costs.
Case Title: Union of India & Others v. The Board of Trustees of the Port of Bombay
Case No.: Civil Appeal No. 4477 of 2010
Bench: Justice B.V. Nagarathna and Justice Manmohan
Date: August 25, 2026
