In a significant ruling on the interplay between the Customs Act, 1962 and the Major Port Trusts Act, 1963, the Supreme Court has upheld the validity of the Customs Notification dated Oct 11, 2000 and held that the Commissioner of Customs had full jurisdiction to approve the Mumbai Port Trust as a custodian under Section 45(1) of the Customs Act. The Apex Court held that the non obstante clause in sub-section (3) of Section 45 of the Customs Act provides that it shall operate “notwithstanding anything contained in any law for the time being in force”, and the expression necessarily includes the Customs Act and the Major Port Trusts Act, notwithstanding the saving clause contained in sub-section (1) of Section 45.
The Apex Court reasoned that the liability contemplated under Section 43 of the Major Port Trusts Act is fundamentally different from the liability created under Section 45(3) of the Customs Act. The former regulates the civil responsibility of the Board, as a bailee, towards the owner of the goods in accordance with the principles embodied in Sections 151, 152 and 161 of the Indian Contract Act, 1872, and such liability is compensatory in nature and governs the inter se rights and obligations between the Board and the owner of the goods. The liability under Section 45(3) of the Customs Act, on the other hand, is not one of indemnification or compensation to the owner of the goods but is a statutory liability to pay customs duty to the Revenue in respect of imported goods which have been pilfered while in the custody of the approved custodian.
The Court further held that under the Customs Act, the expression “loss or destruction of goods” is treated as being distinct from “pilferage”, the latter being specifically governed by Section 13 thereof. Since the Major Port Trusts Act does not specifically deal with pilferage and deals only with loss or destruction of goods, the saving clause under sub-section (1) of Section 45 would not apply to cases of pilferage, and consequently the non obstante clause under sub-section (3) of Section 45 is used as a legislative device to meet such a circumstance.
A Two-Judge Bench comprising Justice B.V. Nagarathna and Justice Manmohan observed that the show cause-cum-demand notices in the present case pertain to instances of pilferage which occurred prior to the issuance of the Customs Notification dated Oct 11, 2000. Since the respondent-Port Trust had not been approved as a custodian under Section 45(1) of the Customs Act during that period, the liability contemplated under Section 45(3) could not have been fastened upon it in respect of those demands. Counsel for the appellants fairly submitted that, in the absence of such approval, the demands raised for the pre-notification period cannot be sustained. Consequently, the controversy in the present appeal was confined to the correctness of the High Court’s declaration that the Notification dated Oct 11, 2000 issued under Section 45(1) of the Customs Act is without jurisdiction and ultra vires the said provision.
The Court further observed that Section 45(1) of the Customs Act contains a saving clause, namely “save as otherwise provided in any law for the time being in force”, while sub-section (3) of Section 45, which was inserted by Act 22 of 1995 with effect from May 26, 1995, begins with a non obstante clause, namely “notwithstanding anything contained in any law for the time being in force”. The Court also observed that the liability of the Board under Section 43 of the Major Port Trusts Act is conditional and arises only upon the fulfilment of statutory conditions precedent, namely the issuance of a receipt under sub-section (2) of Section 42 and the giving of notice within the prescribed period. By contrast, once a person has been approved as a custodian under Section 45(1), sub-section (3) of the Customs Act imposes an independent and absolute statutory liability to pay customs duty on pilfered goods.
Briefly, the Board of Trustees of the Port of Bombay, which is a Major Port Trust constituted under the Major Port Trusts Act, 1963, was served with four show cause-cum-demand notices by the Assistant Commissioner of Customs. These notices sought recovery of customs duty under Section 45(3) of the Customs Act, 1962 in respect of goods that were pilfered while in the custody of the Port Trust during the years 1996-2000. The orders-in-original confirmed the duty demanded. In the interregnum, a Notification dated Oct 11, 2000 and a Public Notice of the same date were issued by the Commissioner of Customs (Import) under Section 45(1) of the Customs Act, declaring the Mumbai Port Trust (MbPT) as a “custodian” of the area notified under Section 8 of the Customs Act.
The Commissioner of Customs (Appeals) dismissed the Port Trust’s appeals. Aggrieved, the Port Trust approached the Bombay High Court, which allowed the petition, holding that under Section 45(1) of the Customs Act, recovery of duty in respect of pilfered goods could only be from a person approved by the Commissioner of Customs and not from a statutory body like the Mumbai Port Trust. The High Court accordingly set aside the orders confirming duty and also struck down the Notification dated Oct 11, 2000 as being without jurisdiction and ultra vires Section 45(1) of the Customs Act.
