Supreme Court Upholds Mumbai Port Trust’s Customs Custodian Status; Holds It Liable for Duty on Pilfered Goods Only After Statutory Approval Under Section 45
Supreme Court Restores Customs Notification Appointing Mumbai Port Trust as Custodian; Protects Port From Duty Demands Raised Before Its Statutory Approval
Facts
The respondent, the Board of Trustees of the Port of Bombay/Mumbai Port Trust, is a statutory Major Port Trust constituted under the Major Port Trusts Act, 1963. Customs authorities issued four show-cause-cum-demand notices dated 18 June 1996, 2 April 1997, 28 April 1997 and 24 May 2000, seeking customs duty under Section 45(3) of the Customs Act, 1962 for imported goods pilfered while in the Port Trust’s custody during 1996–2000. The demands were confirmed by orders-in-original and subsequently upheld by the Commissioner of Customs (Appeals).
Meanwhile, on 11 October 2000, the Commissioner of Customs (Import) issued a notification declaring the relevant Mumbai docks as a customs area and formally approving Mumbai Port Trust as the custodian under Section 45(1) of the Customs Act. The notification expressly made MbPT responsible for duties and responsibilities under Sections 45(2) and 45(3).
Mumbai Port Trust challenged both the duty demands and the notification before the Bombay High Court. On 28 July 2009, the High Court allowed the writ petition. It held that because the Port Trust’s custody of goods arose under the Major Port Trusts Act, it could not be treated as a person approved by the Customs Commissioner under Section 45(1). The High Court consequently quashed both the duty demands and the notification.
The Union of India and customs authorities appealed to the Supreme Court.
Importantly, before the Supreme Court, Customs accepted that the duty demands relating to periods before 11 October 2000 could not survive, because MbPT had not yet been formally approved as custodian under Section 45(1). The real dispute therefore narrowed to the validity of the 11 October 2000 notification itself.
Issues
The principal issue was whether the Commissioner of Customs could validly approve Mumbai Port Trust as custodian under Section 45(1) of the Customs Act, despite the Port Trust already deriving custody and responsibility over goods under the Major Port Trusts Act.
The consequential issue was whether, once so approved, Mumbai Port Trust could be made liable under Section 45(3) to pay customs duty on imported goods pilfered while in its custody.
The Court also had to reconcile the saving clause in Section 45(1) — “save as otherwise provided in any law for the time being in force” — with the non obstante clause in Section 45(3), which operates “notwithstanding anything contained in any law for the time being in force.”
Petitioner/Appellants’ Arguments
The Union of India and Customs authorities argued that the saving clause in Section 45(1) did not prevent the Commissioner from approving a statutory Port Trust as custodian merely because another enactment also placed goods in its custody.
According to Customs, obtaining custody under the Major Port Trusts Act did not grant MbPT immunity from customs duty liability.
They emphasized that Section 45(3) contains a non obstante clause, deliberately intended to ensure that the person approved as custodian bears customs duty liability when imported goods are pilfered while in its custody.
The notification dated 11 October 2000 was therefore a lawful exercise of the Commissioner’s express statutory power under Section 45(1).
However, Customs fairly conceded that demands concerning pilferage occurring before the notification could not be sustained because no Section 45(1) approval existed during that period.
Respondent’s Arguments
Mumbai Port Trust argued that its custody of imported goods arose directly from the Major Port Trusts Act, 1963, rather than from an approval granted by the Customs Commissioner.
It contended that the opening words of Section 45(1), “save as otherwise provided in any law for the time being in force,” excluded situations where another statute already governed custody.
Therefore, according to MbPT, the Commissioner lacked jurisdiction to designate it separately as custodian under Section 45(1), and consequently Section 45(3) could not impose customs duty liability upon it.
Alternatively, MbPT argued that even if the 11 October 2000 notification were valid, it could not operate retrospectively so as to impose liability for pilferage occurring before its issuance.
Analysis of the Law
The Supreme Court examined the interaction between Sections 13 and 45 of the Customs Act and Sections 42 and 43 of the Major Port Trusts Act.
Section 13 provides that when imported goods are pilfered after unloading but before clearance for home consumption or warehousing, the importer is ordinarily not liable for customs duty. Section 45(3), therefore, shifts that duty liability to the approved custodian where the statutory requirements are fulfilled.
The Court drew a critical distinction between two forms of liability.
Under Section 43 of the Major Port Trusts Act, the Port Trust’s liability is essentially the civil liability of a bailee toward the owner of the goods. It is compensatory and conditional.
Section 45(3) of the Customs Act creates something fundamentally different: an independent statutory liability to pay customs duty to the Revenue when imported goods are pilfered while in the custody of an approved custodian.
Thus, the two statutes do not create competing liabilities. They operate in different fields: one concerns compensation owed to the owner; the other concerns customs revenue payable to the State.
The Court further held that once a person is approved as custodian under Section 45(1), Section 45(3) creates an independent and absolute statutory duty liability for pilfered goods, whereas liability under the Major Port Trusts Act remains conditional.
Saving Clause vs Non Obstante Clause
The Court specifically analysed the legislative significance of the saving clause in Section 45(1) and the overriding clause in Section 45(3).
Section 45(3), inserted with effect from 26 May 1995, deliberately begins with a non obstante clause. The Court held that Parliament used this mechanism to ensure that customs duty on pilfered goods did not escape collection merely because another statute separately regulated custody or civil responsibility.
The only essential precondition for Section 45(3) liability is that the concerned person must first have been approved as custodian under Section 45(1).
Precedent Analysis
The Supreme Court relied upon established principles concerning the interpretation of non obstante clauses.
In Aswini Kumar Ghosh v. Arabinda Bose, AIR 1952 SC 369, the Court referred to the principle that the substantive enactment must first be understood according to its natural meaning, after which the non obstante clause operates to displace inconsistent provisions of existing law.
The Court also referred to Dominion of India v. Shrinbai A. Irani, AIR 1954 SC 596, for the principle that a non obstante clause cannot ordinarily cut down otherwise clear operative statutory language and may sometimes operate by way of abundant caution.
Applying those principles, the Court concluded that Parliament intentionally gave Section 45(3) overriding operation so that statutory customs duty liability for pilfered goods would attach to an approved custodian notwithstanding separate legislation governing custody.
Court’s Reasoning
The Court found that there was no real conflict between the Customs Act and the Major Port Trusts Act.
The Major Port Trusts Act deals with the Port Trust’s civil responsibility for loss, destruction or deterioration of goods. By contrast, Section 45(3) protects customs revenue where imported goods are pilfered while in the custody of an approved custodian.
The Court further noted that Section 45(2) imposes statutory obligations upon the custodian regardless of the source from which custody arises. The custodian must maintain records and prevent removal or dealing with goods except with the proper officer’s permission. Pilferage while goods remain in such custody therefore engages the statutory framework governing the custodian.
Accordingly, the Commissioner of Customs was fully competent to issue the 11 October 2000 notification approving Mumbai Port Trust as custodian under Section 45(1). The Bombay High Court was wrong in holding that the Commissioner lacked jurisdiction merely because the Port Trust’s custody was otherwise governed by the Major Port Trusts Act.
At the same time, the Supreme Court maintained an important temporal limitation: Section 45(3) liability cannot arise before approval under Section 45(1).
Consequently, although the 2000 notification was restored, the earlier duty demands concerning pre-notification pilferage remained quashed.
Conclusion
The Supreme Court partly reversed the Bombay High Court.
It upheld the validity of the 11 October 2000 notification appointing Mumbai Port Trust as custodian under Section 45(1) of the Customs Act.
The Court held that the Major Port Trusts Act does not prevent Customs from approving the Port Trust as custodian. Once such approval exists, Section 45(3) can independently impose customs duty liability upon the Port Trust for imported goods pilfered while in its custody.
However, such liability cannot operate retrospectively. Since the disputed show-cause notices concerned periods before 11 October 2000, when MbPT had not yet been approved under Section 45(1), those demands remained quashed. The appeal was disposed of with no order as to costs.
Case Details
Case: Union of India & Others v. The Board of Trustees of the Port of Bombay
Court: Supreme Court of India
Case Number: Civil Appeal No. 4477 of 2010; 2026 INSC 919
Judges: Justice B.V. Nagarathna and Justice Manmohan
Date: 25 August 2026
Result: Appeal disposed of partly in favour of Union of India. The 11 October 2000 notification approving Mumbai Port Trust as custodian was upheld and the Bombay High Court judgment was set aside to that extent; however, the quashing of customs duty demands relating to the period before the notification was left undisturbed.
