![Port Trust Approved as Customs Custodian Liable for Duty on Pilfered Goods Despite Major Port Trusts Act: Supreme Court in Union of India v. Port of Bombay [2026 INSC 919]](/assets/images/article-gst.svg)
Quick Answer: A Major Port Trust can be approved by the Commissioner of Customs as the custodian of imported goods under Section 45(1) of the Customs Act, 1962, and once approved it is liable under Section 45(3) to pay customs duty on goods pilfered from its custody, even though its custody also flows from the Major Port Trusts Act, 1963. The Supreme Court upheld the Notification dated 11.10.2000 approving the Mumbai Port Trust as custodian, but left untouched the quashing of duty demands for pilferage before that date.
In Union of India & Others v. The Board of Trustees of the Port of Bombay (2026 INSC 919), the Supreme Court held that the saving clause in Section 45(1) of the Customs Act does not bar the Commissioner from approving a Port Trust as custodian, because the Port Trust's liability under Section 43 of the Major Port Trusts Act is a conditional, civil liability of a bailee towards the owner, whereas Section 45(3) creates a distinct, absolute statutory liability to pay duty to the Revenue, backed by a non obstante clause (paras 6.17–6.23, 6.28). A Bench of Justice B.V. Nagarathna and Justice Manmohan set aside the Bombay High Court's declaration that the Notification dated 11.10.2000 was without jurisdiction and ultra vires, while not interfering with the quashing of demands for the pre-notification period (para 7).
Status: Bombay High Court order dated 28.07.2009 in Writ Petition No. 1278 of 2003 set aside to the extent it quashed the Notification dated 11.10.2000; quashing of the duty demands for the period before 11.10.2000 not interfered with; appeal disposed of with no order as to costs (para 7).
Headnote: Port Trust as Customs Custodian for Pilfered Goods
Customs Act, 1962 – Sections 13, 23, 45(1), 45(2) and 45(3) – Major Port Trusts Act, 1963 – Sections 42, 43, 44 and 45 – Indian Contract Act, 1872 – Sections 148, 151, 152 and 161 – Duty on pilfered goods – Approval of custodian by Commissioner of Customs – Saving clause versus non obstante clause – Bailee's civil liability versus statutory duty liability – Mumbai Port Trust – Notification dated 11.10.2000.
Held: (i) Section 45(3), inserted with effect from 26.05.1995, fastens liability to pay duty on pilfered goods on the person approved under Section 45(1); since Section 13 absolves the importer, a notification under Section 45(1) is a necessary concomitant to fasten that liability (paras 6.4–6.5, 6.17).
(ii) The saving clause in Section 45(1) would prevail only where another law creates a corresponding liability on the custodian on the same footing; the liability of a Port Trust under Section 43 of the Major Port Trusts Act is not on the same footing (paras 6.5, 6.23).
(iii) The Port Trust's liability under Sections 42 and 43 is conditional (receipt under Section 42(2), prescribed period and notice) and is a compensatory civil liability of a bailee towards the owner of the goods (paras 6.10, 6.12, 6.18, 6.24).
(iv) The liability under Section 45(3) is a distinct statutory liability to pay customs duty to the Revenue; the non obstante clause gives it overriding effect, and the only precondition is approval as custodian under Section 45(1) (paras 6.19–6.22).
(v) There is no inconsistency between the two enactments; the custodian's statutory duties under Section 45(2) apply irrespective of the legal source of custody, and pilferage results from a breach of those duties (paras 6.21, 6.25–6.27, 6.29).
(vi) Under the Customs Act, pilferage is distinct from loss or destruction of goods, and the Notification dated 11.10.2000 approving the Mumbai Port Trust as custodian is valid; but no liability could arise for the period before that approval (paras 3.3, 6.30–6.31, 7).
(paras 3.3–7)
Case Details: Union of India v. Board of Trustees of the Port of Bombay (2026 INSC 919)
Final Outcome: Appeal disposed of; Notification dated 11.10.2000 held valid; High Court judgment set aside to the extent it quashed the Notification; quashing of pre-notification show cause-cum-demand notices not interfered with; no order as to costs.
Case: Union of India & Others v. The Board of Trustees of the Port of Bombay
Neutral Citation: 2026 INSC 919
Case No.: Civil Appeal No. 4477 of 2010
Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable
Date of Decision: 25 August 2026
Bench: Justice B.V. Nagarathna (author) and Justice Manmohan
Relevant Acts & Sections: Customs Act, 1962 – Sections 2, 8, 12, 13, 23, 45, 47, 141 and 160(9); Major Port Trusts Act, 1963 – Sections 2, 42, 43, 44, 45 and 128; Indian Contract Act, 1872 – Sections 148, 151, 152 and 161
Impugned Order: Order dated 28.07.2009 of a Division Bench of the Bombay High Court in Writ Petition No. 1278 of 2003, quashing the orders-in-original and the Notification dated 11.10.2000 (paras 1, 2.3)
Counsel: Sri V. Chandrashekara Bharati for the appellants; Sri Rakesh Khanna, Senior Counsel, for the respondent (paras 3, 3.2)
Source: Supreme Court of India
Key Holdings of the Supreme Court
- The Commissioner of Customs (Import) was fully justified in issuing the Notification dated 11.10.2000 approving the Mumbai Port Trust as custodian under Section 45(1) (para 6.28).
- Liability under Section 43 of the Major Port Trusts Act is a conditional civil liability of a bailee to the owner; liability under Section 45(3) of the Customs Act is an absolute statutory liability to the Revenue (paras 6.18–6.20, 6.23).
- The non obstante clause in Section 45(3) overrides the Major Port Trusts Act, which provides for no tax liability on pilferage (para 6.22).
- A Port Trust's rights of indemnity against others do not detract from its primary liability under Section 45(3) (para 6.21).
- Pilferage is distinct from loss simpliciter; loss other than pilferage does not attract duty under Section 45 (paras 6.29–6.30).
- No duty under Section 45(3) could be fastened for pilferage before the approval dated 11.10.2000 (paras 3.3, 7).
Brief Facts of the Case
The respondent is a Major Port Trust constituted under the Major Port Trusts Act, 1963. The Assistant Commissioner of Customs issued show cause-cum-demand notices dated 18.06.1996, 02.04.1997, 28.04.1997 and 24.05.2000 seeking customs duty under Section 45(3) of the Customs Act on goods pilfered while in its custody during 1996–2000. Orders-in-original confirmed the demands (para 2).
Meanwhile, by a Notification and Public Notice dated 11.10.2000, the Commissioner of Customs (Import), exercising power under Section 45(1), approved the Mumbai Port Trust as custodian of the notified customs area, responsible for the duties under Sections 45(2) and 45(3) (paras 2.1, 4.5).
The Commissioner of Customs (Appeals) dismissed the Port Trust's appeals on 30.07.2002. The Port Trust then challenged that order and the Notification in Writ Petition No. 1278 of 2003. On 28.07.2009 the Bombay High Court held that duty on pilfered goods is recoverable only from a person approved by the Commissioner, not from a body entrusted with custody by law, set aside the confirmation orders and declared the Notification without jurisdiction and ultra vires. The Union of India appealed (paras 2.2–2.3).
Issues Before the Supreme Court
- Whether the Notification dated 11.10.2000 approving the Port Trust as custodian under Section 45(1) of the Customs Act is valid (para 3.4).
- Whether the Major Port Trusts Act, through the saving clause in Section 45(1), excludes the Commissioner's power, or whether liability under Section 45(3) attaches upon approval (paras 5–5.1).
- Whether duty could be recovered for pilferage before the date of the Notification (para 3.3).
Court's Findings and Reasoning
Saving clause and non obstante clause (paras 6.1–6.2, 6.5): Relying on Aswini Kumar Ghosh and Shrinbai A. Irani, the Court explained that "any law for the time being in force" includes the enactment in which the words occur. Section 45(1) operates by way of exception: if another law both places custody on a person and fastens duty for pilfered goods on him, the Commissioner cannot approve another person.
Scheme of the Major Port Trusts Act (paras 6.9–6.14): Under Sections 42 and 43, the Board is responsible for loss of goods as a bailee under Sections 151, 152 and 161 of the Contract Act, but only if a receipt under Section 42(2) is issued, within the period prescribed by regulations, and subject to notice of loss.
Two different liabilities (paras 6.17–6.21): If the conditional bailee liability alone governed, no duty would be recoverable on pilfered goods, as Section 13 absolves the importer. Parliament inserted Section 45(3) to close this lacuna. Bailee liability is compensatory and runs to the owner; Section 45(3) is a statutory liability to the Revenue. Their source, nature and object are distinct, so there is no inconsistency to resolve.
Overriding effect (paras 6.22–6.23): The non obstante clause in Section 45(3) covers the Customs Act and the Major Port Trusts Act. The saving clause would prevail only where both laws create liability on the same footing, which they do not here; the only precondition for Section 45(3) is approval under Section 45(1).
Duties under Section 45(2) (paras 6.25–6.27): Whatever the source of custody, the custodian must keep records and prevent unauthorised removal. Pilferage results from a breach of these duties, which is why liability falls on the approved custodian.
Pilferage versus loss (paras 6.29–6.31): Section 23 operates without prejudice to Section 13, showing that pilferage is distinct from loss or destruction. Loss simpliciter remains governed by the Major Port Trusts Act; pilferage attracts duty under Section 45(3). The Notification, issued precisely to collect duty on pilfered goods, cannot be faulted because custody is otherwise governed by the Major Port Trusts Act.
Pre-notification demands (para 3.3): Counsel for the appellants fairly accepted that, without approval under Section 45(1), the demands for the period before 11.10.2000 cannot be sustained.
Final Outcome and Directions
- The Notification dated 11.10.2000 issued under Section 45(1) of the Customs Act is valid (para 7(a)).
- The High Court's judgment dated 28.07.2009, to the extent it quashed the Notification, is set aside (para 7(b)).
- The quashing of the show cause-cum-demand notices dated 18.06.1996, 02.04.1997, 28.04.1997 and 24.05.2000, relating to the period before the Notification, is not interfered with (para 7(c)).
- Appeal disposed of; no order as to costs (para 7).
Legal Principle Laid Down
A Port Trust whose custody of imported goods flows from the Major Port Trusts Act may still be approved as custodian under Section 45(1) of the Customs Act. Once approved, it is liable under Section 45(3) to pay customs duty on goods pilfered from its custody, because that statutory liability to the Revenue is distinct from, and overrides, the conditional bailee liability under Section 43 of the Major Port Trusts Act. No such liability arises for pilferage before the approval (paras 3.3, 6.22–6.23, 6.28, 7).
Precedents Relied Upon
- Aswini Kumar Ghosh v. Arabinda Bose, AIR 1952 SC 369 – Relied upon – a non obstante clause sets aside inconsistent existing laws after the enacting part is construed. Discussed at para 6.1.
- Dominion of India v. Shrinbai A. Irani, AIR 1954 SC 596 – Relied upon – a non obstante clause need not be co-extensive with the operative part and cannot cut down clear words. Discussed at para 6.1.
Important Paragraphs of the Judgment
Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.
Para 3.3: "Since the respondent had not been approved as a custodian under Section 45(1) of the Customs Act during that period, the liability contemplated under Section 45(3) could not have been fastened upon it in respect of those demands."
Para 6.19: "It is a statutory liability to pay customs duty to the Revenue in respect of imported goods which have been pilfered while in the custody of the approved custodian."
Para 6.22: "The only precondition for the applicability of sub-section (3) is that the person concerned has been approved as the custodian under sub-section (1) of Section 45."
Para 6.26: "Thus, irrespective of the legal source of custody, the custodian is under a statutory obligation to maintain proper records of the goods and to ensure that they are neither removed nor otherwise dealt with except with the permission of the proper officer."
Para 6.28: "Consequently, on a juxtaposition of sub-sections (1), (2) and (3) of Section 45 of the Customs Act with the provisions of the Major Port Trusts Act, 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."
Para 6.31: "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."
Practical Impact of the Ruling
- For Major Port Trusts and custodians: Statutory custody under the Major Port Trusts Act is no shield against duty on pilfered goods once the Commissioner approves the entity as custodian (paras 6.22, 6.28).
- For the Revenue: Demands under Section 45(3) must rest on a prior approval under Section 45(1); pilferage before approval cannot be taxed against the custodian (paras 3.3, 7).
- For importers: Section 13 continues to absolve the importer of duty on goods pilfered before clearance, unless the goods are restored (paras 6.4, 6.16).
- For claims between Port Trusts and others: Indemnity or recovery rights against a person responsible for the loss do not reduce the custodian's primary duty liability (para 6.21).
FAQs on Customs Duty on Pilfered Goods
1. What did the Supreme Court decide in Union of India v. Board of Trustees of the Port of Bombay?
It upheld the Notification dated 11.10.2000 approving the Mumbai Port Trust as custodian under Section 45(1) of the Customs Act, and set aside the High Court's contrary finding (paras 6.28, 7).
2. Who pays customs duty on imported goods pilfered before clearance?
Not the importer, under Section 13, unless the goods are restored; the custodian approved under Section 45(1) is liable under Section 45(3) (paras 6.4, 6.16).
3. Does the Major Port Trusts Act exclude this liability?
No. Its Section 43 creates only a conditional bailee liability to the owner, while Section 45(3) creates a distinct statutory liability to the Revenue with a non obstante clause (paras 6.18–6.23).
4. Could the Port Trust be made to pay duty for pilferage before 11.10.2000?
No. Without approval under Section 45(1) no liability under Section 45(3) could arise, and the appellants did not press those demands (paras 3.3, 7(c)).
5. Is pilferage the same as loss of goods under the Customs Act?
No. Section 23 deals with loss or destruction without prejudice to Section 13, which governs pilferage; only pilferage attracts duty under Section 45 (paras 6.29–6.30).
Keywords: 2026 INSC 919, Union of India v. Board of Trustees of the Port of Bombay, Section 45(3) Customs Act, duty on pilfered goods, Section 13 Customs Act, custodian approval Section 45(1), Major Port Trusts Act Section 43, Mumbai Port Trust, non obstante clause, saving clause, bailee liability, Notification dated 11.10.2000, Justice B.V. Nagarathna, Justice Manmohan, Supreme Court judgment
Related on LegalTaxGuru
Download Judgment PDF – Union of India v. Board of Trustees of the Port of Bombay
Source: Supreme Court of India (official website).