The Supreme Court has held that the Commissioner of Customs can validly approve a Port Trust as the custodian of imported goods under Section 45(1) of the Customs Act, 1962, making it liable to pay customs duty on goods pilfered while in its custody under Section 45(3).
A Bench of Justice B.V. Nagarathna and Justice Manmohan delivered the judgment on August 25, 2026, in Union of India & Others v. The Board of Trustees of the Port of Bombay, Civil Appeal No. 4477 of 2010.
Background of the Case
The dispute arose from several instances of pilferage of imported goods at the Mumbai Port during 1996 to 2000. The Customs Department issued show-cause-cum-demand notices to the Port Trust seeking recovery of customs duty under Section 45(3) of the Customs Act.
The notices were followed by orders confirming the duty demands. The Port Trust challenged them before the Commissioner of Customs (Appeals), but its appeals were dismissed.
The matter then reached the Bombay High Court. In July 2009, the High Court allowed the Port Trust's writ petition and held that the Customs Commissioner could not approve the Mumbai Port Trust as a custodian under Section 45(1), since its custody of goods was already governed by the Major Port Trusts Act, 1963. The High Court also quashed the October 11, 2000 notification declaring the Port Trust a custodian.
The Union of India challenged that ruling before the Supreme Court.
Issue Before the Supreme Court
The central question was whether the October 11, 2000 notification approving the Mumbai Port Trust as a custodian under Section 45(1) of the Customs Act was legally valid, despite the Port Trust's responsibilities under the Major Port Trusts Act.
The Supreme Court also noted an important limitation. The disputed instances of pilferage covered a period before the October 11, 2000 notification. The Union's counsel accepted that, without prior approval under Section 45(1), liability under Section 45(3) could not be imposed for that earlier period.
Supreme Court's Observations
The Court examined the relationship between the Customs Act and the Major Port Trusts Act.
Under the Major Port Trusts Act, a Port Trust can take charge of goods and, in specified circumstances, bears civil responsibility for their loss or deterioration. The Supreme Court explained that this responsibility operates in the nature of a bailee's liability towards the owner of the goods.
However, the Court found that the liability under Section 45(3) of the Customs Act serves a different purpose. It is a statutory obligation to pay customs duty to the Revenue when imported goods are pilfered while in the custody of an approved custodian.
The Court observed:
“The source, nature and object of the two liabilities are, clearly, distinct.”
The Bench further held that the Major Port Trusts Act does not specifically impose a customs-duty liability on a Port Trust for pilfered goods. Section 45(3) of the Customs Act, on the other hand, contains a non obstante clause giving the provision overriding effect where its conditions are satisfied.
The Court therefore concluded that there was no conflict between the two statutory schemes.
Decision of the Supreme Court
The Supreme Court held that the October 11, 2000 notification issued by the Commissioner of Customs under Section 45(1) was valid. It consequently set aside the Bombay High Court's judgment to the extent that it had quashed that notification.
At the same time, the Court did not interfere with the High Court's decision concerning the demand notices relating to the period before October 11, 2000. Since the Port Trust had not been approved as a custodian under Section 45(1) during that period, liability under Section 45(3) could not arise.
The appeal was accordingly disposed of, with no order as to costs.
Case Details
Case Title: Union of India & Others v. The Board of Trustees of the Port of Bombay
Case Number: Civil Appeal No. 4477 of 2010
Judges: Justice B.V. Nagarathna and Justice Manmohan
Decision Date: August 25, 2026
