The Supreme Court on Tuesday, August 25, upheld a Commissioner of Customs order classifying the Mumbai Port Trust as a “custodian” under the Customs Act for the purpose of paying duty on pilfered goods, that is, 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 pilfered goods would be payable by the port trust as a custodian under the Customs Act.
A bench of Justice BV Nagarathna and Justice Manmohan observed that 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. The bench set aside the part of the Bombay High Court’s judgment that had held the Customs notification declaring the Mumbai Port Trust as a custodian to be illegal.
The High Court had earlier held 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, a provision entitling the department to seek recovery of customs duty from the custodian in respect of imported goods allegedly pilfered while in its custody.
The Supreme Court disagreed, holding 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, and that the High Court was not justified in holding that the Commissioner lacked jurisdiction to issue the notification.
The dispute arose from show-cause-cum-demand notices issued by Customs authorities to the Port Trust between 1996 and 2000, seeking recovery of customs duty under Section 45(3) in respect of imported goods allegedly pilfered while in its custody. The Mumbai Port Trust had challenged the duty demands before the Bombay High Court, which ruled in its favour before the Union government appealed to the Supreme Court.
The judgment, authored by Justice Nagarathna, rejected the port trust’s argument that the demand created an additional liability not otherwise intended under the Customs Act, on the grounds that liability for loss of goods is covered under the Major Port Trusts Act. The Court clarified that while the Major Port Trusts Act contains provisions concerning loss, destruction or deterioration, pilferage is specifically addressed under the Customs Act. It held that any loss of goods other than pilferage is not subject to payment of customs duty under Section 45, but that in a case of pilferage, duty is indeed payable by the person approved under sub-section (1) of Section 45, regardless of the fact that custody of the goods is otherwise governed by the Major Port Trusts Act.
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, setting aside the Bombay High Court’s judgment quashing the notification.
Cause Title: Union of India & Ors. v. The Board of Trustees of the Port of Bombay Citation: 2026 LiveLaw (SC) 863
