Port Trusts can be approved as customs custodians and made liable for duty on pilfered imports, rules Supreme Court

The respondent, a Major Port Trust constituted under the Major Port Trusts Act, 1963, received show-cause-cum-demand notices seeking recovery of customs duty under Section 45(3) of the Customs Act, 1962, for imported goods allegedly pilfered while in its custody between 1996 and 2000.

The demands were confirmed by orders-in-original, and the respondent’s appeals were dismissed by the Commissioner of Customs (Appeals) on 30.07.2002.

During the pendency of the matter, the Commissioner of Customs issued a Notification dated 11.10.2000 under Section 45(1) of the Customs Act approving the Mumbai Port Trust as custodian of the notified customs area and making it responsible under Sections 45(2) and 45(3).

The Bombay High Court quashed the duty demands and declared the Notification ultra vires, holding that the Port Trust’s custody arose under the Major Port Trusts Act and could not be imposed through Section 45(1) of the Customs Act.

Whether the Commissioner of Customs had jurisdiction under Section 45(1) of the Customs Act, 1962, to approve the Mumbai Port Trust—a statutory body whose custody of goods was also governed by the Major Port Trusts Act, 1963—as custodian of imported goods.

Whether, upon such approval, liability for customs duty on goods pilfered while in the Port Trust’s custody could be imposed under Section 45(3) of the Customs Act, notwithstanding the provisions of the Major Port Trusts Act.

Whether the pre-11.10.2000 duty demands could be sustained in the absence of an approval under Section 45(1) during the relevant period.

Section 45(1) of the Customs Act requires imported goods unloaded in a customs area to remain in the custody of a person approved by the Principal Commissioner or Commissioner of Customs, subject to the saving clause “save as otherwise provided in any law for the time being in force”.

Section 45(3), introduced with effect from 26.05.1995, creates a statutory liability upon the person referred to in Section 45(1) to pay customs duty on goods pilfered while in that person’s custody, notwithstanding anything contained in any law for the time being in force.

Sections 42 and 43 of the Major Port Trusts Act govern the Port Trust’s services and its conditional civil responsibility as a bailee for loss, destruction or deterioration of goods; they do not impose liability to pay customs duty to the Revenue.

In construing non obstante clauses, the Court relied on Aswini Kumar Ghosh v. Arabinda Bose, AIR 1952 SC 369, and Dominion of India v. Shrinbai A. Irani, AIR 1954 SC 596, holding that a non obstante clause overrides inconsistent provisions of other laws but cannot distort the clear meaning of the enacting provision.

The Court distinguished the two statutory regimes by examining the nature and object of the liabilities imposed.

The Major Port Trusts Act makes the Port Trust conditionally liable as a bailee towards the owner of goods, subject to the issuance of a receipt and other statutory requirements under Section 43.

That liability is compensatory and concerns the civil relationship between the Port Trust and the owner.

In contrast, Section 45(3) of the Customs Act imposes an independent statutory obligation to pay customs duty to the Revenue when imported goods are pilfered while in the custody of a person approved under Section 45(1).

Since the Major Port Trusts Act contains no corresponding liability for customs duty on pilfered goods, its custody provisions did not prevent approval of the Port Trust under Section 45(1).

The non obstante clause in Section 45(3) was intended to ensure recovery of customs duty notwithstanding other laws governing custody, particularly because Section 13 absolves the importer from such duty.

The Court also noted that Section 45(2) applies irrespective of the source of custody, reinforcing the statutory control of customs over goods in a customs area.

The High Court’s finding that the Notification was ultra vires and its consequent quashing were set aside.

Nevertheless, the Court did not interfere with the quashing of the show-cause-cum-demand notices concerning pilferage prior to 11.10.2000, since no liability under Section 45(3) could arise without prior approval under Section 45(1).

The appeal was accordingly disposed of with no order as to costs.