Supreme Court Rules Port Authorities Can Be Made to Pay Customs Duty on Pilfered Imports
Union of India & Others v. The Board of Trustees of the Port of Bombay, 2026 INSC 919 (25 August 2026)
What the case was about
When imported goods disappear from a port before they are cleared by customs, who bears the financial loss? The Supreme Court of India examined this question in an appeal concerning the Bombay Port Trust and a series of thefts that occurred between 1996 and 2000. At the heart of the dispute was a 2000 notification by the Commissioner of Customs approving the Mumbai Port Trust as the official “custodian” of a notified customs area under the Customs Act, 1962. The Union of India argued that this approval meant the Port Trust could be held liable for customs duty on any goods stolen while in its custody. The Port Trust, however, insisted that because its control over the docks flowed from the Major Port Trusts Act, 1963, the customs commissioner had no power to issue such a notification in the first place. The judgment clarifies the delicate balance between the Customs Act and other statutes that govern port operations.
The key facts
The respondent, the Board of Trustees of the Port of Bombay, is a statutory body constituted under the Major Port Trusts Act, 1963 (para 2). During the late 1990s, several shipments of imported goods were pilfered while stored in areas controlled by the Port Trust. The Assistant Commissioner of Customs responded by issuing show-cause-cum-demand notices seeking recovery of customs duty from the Port Trust under Section 45(3) of the Customs Act (para 2). Adjudication orders confirmed the duty demands, and the Commissioner of Customs (Appeals) upheld them in 2002 (para 2.2).
In the midst of these proceedings, on 11 October 2000, the Commissioner of Customs issued a notification appointing the Mumbai Port Trust as the approved custodian of the relevant customs area under Section 45(1) of the Customs Act, along with a public notice imposing statutory duties and responsibilities (para 2.1). Because the alleged pilferages all occurred before this notification was issued, the appellants fairly conceded that the demands for the pre-notification period could not be legally sustained absent prior approval (para 3.3). The dispute therefore narrowed to a single, forward-looking question: was the notification itself valid, and could liability under Section 45(3) be fastened on the Port Trust because of it? (para 3.4)
The Bombay High Court, in 2009, sided with the Port Trust. It allowed the writ petition, set aside the duty orders, and declared the 11 October 2000 notification to be without jurisdiction and ultra vires Section 45(1) (para 2.3). The Union of India then approached the Supreme Court.
The questions before the Court
The Bench—comprising Justices B.V. Nagarathna and R. Mahadevan—framed the controversy around three interlinked legal questions (para 3.4; see also para 5):
- Is the notification dated 11 October 2000 valid?
- If it is valid, can liability for customs duty on pilfered goods be imposed on the Port Trust under Section 45(3)?
- Does the saving clause in Section 45(1) of the Customs Act—“save as otherwise provided in any law for the time being in force”—prevent the Commissioner from approving a custodian that already holds goods under another statute such as the Major Port Trusts Act? Or does the non obstante clause in Section 45(3) override such other laws?
What the Court decided and why
Answering the questions in favour of the revenue, the Court held that the notification was valid and that Section 45(3) could indeed impose customs duty liability on the Port Trust.
The Court began by dissecting the statutory language. Section 45(1) empowers the Commissioner to approve the person in whose custody imported goods shall remain, but it opens with a saving clause that preserves the operation of any other law for the time being in force (para 5). By contrast, Section 45(3)—inserted by Parliament in 1995—creates an obligation on the person approved under sub-section (1) to pay customs duty on pilfered goods, and it commences with a non obstante clause: “notwithstanding anything contained in any law for the time being in force” (para 5).
Referring to canonical precedents such as Aswini Kumar Ghosh v. Arabinda Bose and Dominion of India v. Shrinbai A. Irani, the Court explained that a non obstante clause is designed to set aside inconsistent provisions in existing laws, but it does not cut down the clear terms of the very Act in which it appears (para 6.1). Conversely, the saving clause in Section 45(1) carves out a limited exception: it only applies where another enactment already prescribes both the custody of imported goods and the specific liability to pay customs duty on pilfered goods (para 6.5). If another law merely places goods in a party’s custody but says nothing about customs duty liability for theft, the Commissioner is not barred from stepping in under Section 45(1).
Applying this to the Major Port Trusts Act, the Court noted that the statute casts the Board as a bailee under Sections 151, 152 and 161 of the Indian Contract Act, 1872, subject to conditions such as the issuance of a receipt and timely notice of loss (paras 6.9–6.10). However, the Act does not independently fasten liability for customs duty on pilfered goods (para 6.5). Since no other law imposed that specific fiscal burden, the saving clause in Section 45(1) did not exclude the Port Trust from being approved as a custodian.
The Court then turned to Section 45(3). Before its insertion in 1995, if goods were pilfered after unloading, the importer was absolved of liability under Section 13, and if no custodian was liable, the customs duty was simply lost to the exchequer (para 6.17). Parliament introduced sub-section (3) precisely to remedy this revenue lacuna (para 6.17). Once the Commissioner approves a person under Section 45(1), that person becomes statutorily responsible for the duty on stolen goods, regardless of what other laws might say about general bailment or storage liabilities.
Consequently, because the Major Port Trusts Act did not already impose customs duty liability for pilfered goods, the Commissioner’s approval of the Port Trust under Section 45(1) was intra vires, and the liability under Section 45(3) lawfully attached to it.
Why it matters
The ruling settles an important question of interplay between special port legislation and the Customs Act. Port authorities across India often take charge of cargo under their own statutory regimes; this judgment makes clear that such regimes do not automatically immunise them from being designated as customs custodians and being held fiscally accountable for theft. At the same time, the Court imposed a meaningful limit: the Customs Commissioner’s power is ousted only when another law already prescribes both custody and customs-duty liability for pilfered goods. For the shipping and logistics sector, the decision means that approved custodians must now factor in potential customs duty exposure for stolen goods. For the revenue authorities, it closes a loophole that previously allowed duty to evaporate when importers were excused under Section 13 and custodians pointed to external statutes. Finally, the judgment offers a clear interpretive roadmap for understanding when saving clauses yield to non obstante provisions, a lesson that extends well beyond customs law.