The Supreme Court has ruled that port trusts governed by the Major Port Trusts Act can still be held responsible for customs duty on imported goods that are pilfered while under their custody.
A Bench comprising Justice BV Nagarathna and Justice Manmohan upheld the Customs authorities’ decision to recognise the Mumbai Port Trust as a custodian under the Customs Act. The ruling overturns the Bombay High Court’s finding that such a notification was legally impermissible.
The dispute centred on customs demands raised against the Mumbai Port Trust between 1996 and 2000. The authorities sought recovery of duty under Section 45(3) of the Customs Act for imported goods allegedly stolen while in the port’s custody.
The Port Trust had challenged the demands, arguing that it was a statutory body established under the Major Port Trusts Act, 1963, and that the Customs Act could not impose an additional liability that was already addressed under the port legislation.
The Bombay High Court accepted this position and held that the Customs Commissioner could not use Section 45(1) to place the Port Trust within the statutory framework governing custodians of imported goods.
The Supreme Court took a different view.
The Court noted that the Major Port Trusts Act contains provisions dealing with the loss, destruction or deterioration of goods. However, pilferage is specifically dealt with under the Customs Act, creating a separate statutory regime for such cases.
According to the Court, a distinction must therefore be drawn between an ordinary loss of goods and pilferage. Where goods are simply lost, the relevant provisions of the Major Port Trusts Act may apply. But where imported goods have been pilfered, Section 45 of the Customs Act specifically governs the liability for customs duty.
The Court explained that an importer is generally not required to pay duty on pilfered goods unless those goods are subsequently restored to the importer. Instead, the responsibility falls on the person approved as the custodian by the Principal Commissioner or Commissioner of Customs under Section 45(1).
In the Mumbai Port Trust’s case, the Customs Commissioner had issued a notification on October 11, 2000, formally approving the Port Trust as a custodian under Section 45(1).
The Supreme Court held that the notification was valid and that the Commissioner had the necessary jurisdiction to issue it.
The judgment also rejected the argument that recognising the Port Trust as a custodian under the Customs Act amounted to creating a new liability beyond what Parliament had intended.
The Court emphasised that the two statutes operate in different fields when it comes to pilferage. While the Major Port Trusts Act may govern other forms of loss involving goods, customs duty arising specifically from pilferage is governed by the Customs Act.
The Supreme Court consequently set aside the portion of the Bombay High Court judgment that had struck down the Customs notification and restored the validity of the Mumbai Port Trust’s status as a custodian for the purposes of Section 45 of the Customs Act.
The ruling makes clear that statutory status under the Major Port Trusts Act does not, by itself, shield a port from customs liability when imported goods are pilfered during its custody.
