Customs Duty on Pilfered Imported Goods Cannot Disappear into a Statutory Vacuum: Supreme Court Upholds the Liability of an Approved Port Trust Custodian Under Section 45(3) of the Customs Act

Case Name: Union of India & Others v. The Board of Trustees of the Port of Bombay

Date of Judgment: 25 August 2026

Citation: 2026 INSC 919

Bench: Justice B.V. Nagarathna and Justice Manmohan

Held: The Supreme Court held that the Commissioner of Customs is competent to approve the Mumbai Port Trust as a custodian of imported goods under Section 45(1) of the Customs Act, 1962, notwithstanding that the Port Trust otherwise derives custody of such goods under the Major Port Trusts Act, 1963. Once a person or statutory body is approved as a custodian under Section 45(1), Section 45(3), by virtue of its non obstante clause, imposes an independent and absolute statutory liability upon such custodian to pay customs duty on goods pilfered while in its custody. The civil liability of a Port Trust as a bailee under Sections 42 and 43 of the Major Port Trusts Act is distinct from its statutory liability towards the Revenue under Section 45(3) of the Customs Act.

Summary: The dispute arose from show cause-cum-demand notices issued to the Bombay Port Trust for recovery of customs duty on imported goods pilfered while in its custody between 1996 and 2000. The Bombay High Court had quashed the demands and the notification dated 11 October 2000 by which the Commissioner of Customs approved the Mumbai Port Trust as a custodian under Section 45(1) of the Customs Act. The High Court reasoned that the Port Trust’s custody flowed from the Major Port Trusts Act and, therefore, the Commissioner lacked jurisdiction to approve it separately under the Customs Act.

The Supreme Court rejected this interpretation. It explained that Section 43 of the Major Port Trusts Act regulates the Port Trust’s conditional civil responsibility as a bailee towards the owner of the goods, whereas Section 45(3) of the Customs Act creates a separate statutory liability owed to the Revenue. Under Section 13 of the Customs Act, an importer is ordinarily absolved from paying duty when imported goods are pilfered after unloading but before clearance or warehousing. Section 45(3) was introduced to prevent the corresponding customs duty from becoming irrecoverable by fastening liability upon the approved custodian in whose custody the pilferage occurred.

The Court clarified that the saving clause in Section 45(1), “save as otherwise provided in any law for the time being in force,” does not neutralise the overriding liability expressly created by Section 45(3). The latter provision operates “notwithstanding anything contained in any law for the time being in force” and, therefore, overrides any inconsistent or conditional liability under another enactment. The Court also distinguished “pilferage” from ordinary loss or destruction of goods. While general loss or destruction may be governed by the Major Port Trusts Act, pilferage is specifically regulated by Sections 13 and 45(3) of the Customs Act.

Decision: The Supreme Court upheld the validity of the notification dated 11 October 2000 approving the Mumbai Port Trust as a custodian under Section 45(1) of the Customs Act and set aside the Bombay High Court’s judgment to the extent it had quashed that notification. However, the Court did not restore the show cause-cum-demand notices relating to periods before 11 October 2000 because no liability under Section 45(3) could arise before the Port Trust was formally approved as a custodian under Section 45(1). The appeal was disposed of accordingly, with no order as to costs.