Supreme Court Holds Ports Governed By Major Port Trusts Act Are Liable To Pay Customs Duty On Pilfered Goods Under Customs Act

In a ruling clarifying the interplay between the Customs Act, 1962 and the Major Port Trusts Act, 1963, the Supreme Court has held that a port trust constituted under the Major Port Trusts Act cannot escape liability to pay customs duty on pilfered goods merely because its custody of cargo is otherwise governed by that special statute. A Bench comprising Justice B.V. Nagarathna and Justice Manmohan set aside the part of the Bombay High Court’s Judgment which had quashed a Customs notification declaring the Mumbai Port Trust a custodian under the Customs Act.
The ruling in Union of India and Others v. The Board of Trustees of the Port of Bombay [2026 LiveLaw (SC) 863] restores the Customs Commissioner’s Notification approving the Mumbai Port Trust as custodian under Section 45(1) of the Customs Act and affirms that the Port Trust remains answerable for duty on goods pilfered while in its custody.
Background of the Dispute
The dispute traced back to show-cause-cum-demand notices issued by the Customs authorities to the Mumbai Port Trust between 1996 and 2000, seeking recovery of customs duty under Section 45(3) of the Customs Act in respect of imported goods allegedly pilfered while in its custody. The Respondent-Port Trust resisted the demands and challenged them before the Bombay High Court.
The Respondent contended that as a statutory body constituted under the Major Port Trusts Act it could not be saddled with an additional liability that was not otherwise contemplated for it under the Customs Act and that any loss of goods in its custody fell to be governed exclusively by the Major Port Trusts Act. The Bombay High Court accepted this position and held that Section 45(1) of the Customs Act permitted approval only of a person otherwise responsible for the custody of imported goods and that the provision could not override the statutory framework governing the Port Trust. The High Court accordingly quashed the Commissioner’s Notification of 11 October 2000 approving the Mumbai Port Trust as custodian. The Union Government carried the matter to the Supreme Court.
The Supreme Court’s Analysis
Setting aside the High Court’s Order the Bench held that the Bombay Port Trust could not resist the Customs Commissioner’s Notification merely on the ground that its custody of goods was regulated by the Major Port Trusts Act. The Judgment authored by Justice Nagarathna rejected the Respondent’s argument that the Notification created an additional liability not intended under the Customs Act since the loss of goods was already covered under the Major Port Trusts Act.
The Court drew a clear distinction between loss of goods simpliciter and pilferage. It observed that the Major Port Trusts Act deals with loss, destruction or deterioration of goods generally and that such general loss would be governed by that statute in view of the saving clause under Section 45(1) of the Customs Act. Pilferage however stands on a different footing since it is not addressed under the Major Port Trusts Act at all and is dealt with exclusively under the Customs Act, where duty on pilfered goods is imposed under Section 45(3). The Court held that because pilferage falls outside the saving clause the non obstante clause in Section 45(3) operates as the legislative device to fasten liability on the approved custodian regardless of which statute otherwise governs custody of the goods.
The Court further reasoned that since an importer is not liable to pay duty on pilfered goods except where the goods are restored to the importer the obligation necessarily falls on the person approved under Section 45(1) as custodian. The Notification dated 11 October 2000 was issued precisely for collecting duty on pilfered goods under Section 45(3) and the Court held that it could not be faulted merely because custody was otherwise governed by the Major Port Trusts Act.
Validity of the Custodian Notification
On the question of jurisdiction the Court held that the Commissioner of Customs was fully justified in issuing the Notification approving the Mumbai Port Trust as custodian under Section 45(1) of the Customs Act. It held that the High Court was not justified in concluding that the Commissioner lacked jurisdiction to issue the Notification and in quashing it on that basis. The Court accordingly restored the validity of the Notification and upheld the Customs Department’s authority to recover duty on pilfered goods from the Port Trust in its capacity as approved custodian.
Conclusion and Takeaways
Allowing the Appeal the Supreme Court set aside the Bombay High Court’s Order quashing the Customs Notification and upheld the Commissioner’s Notification declaring the Mumbai Port Trust a custodian under Section 45(1) of the Customs Act. The decision settles an important question on the interface between special statutes governing port authorities and the general scheme of customs duty on pilfered goods.
The Judgment reaffirms two significant propositions: first that loss of goods simpliciter in the custody of a statutory port authority is governed by the special enactment constituting that authority and second that pilferage of imported goods remains a matter exclusively governed by the Customs Act regardless of which statute otherwise regulates custody. The ruling therefore ensures that port trusts and similar custodians cannot invoke their own constituent statutes to avoid the specific duty liability that Parliament has cast on approved custodians under the Customs Act.
Shomdeepta Chanda
Associate
The Indian Lawyer & Allied Services

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