2026 INSC 919

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4477 OF 2010

UNION OF INDIA & OTHERS … APPELLANTS

VERSUS

THE BOARD OF TRUSTEES OF

THE PORT OF BOMBAY … RESPONDENT

J U D G M E N T

NAGARATHNA, J.

Being aggrieved by the order dated 28.07.2009 passed by the

Division Bench of the Bombay High Court allowing the Writ Petition

No.1278 of 2003 filed by the respondent-Port of Bombay Trust, the

Union of India and Others have preferred this appeal.

Brief Facts:

2. The respondent herein is a Major Port Trust, constituted

under the Major Port Trusts Act, 1963 (for short, “Major Port Trusts

Act”). The Assistant Commissioner of Customs issued show cause-

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cum-demand notices dated 18.06.1996, 02.04.1997, 28.04.1997,

and 24.05.2000 to the respondent as to why customs duty should

not be recovered from the respondent in terms of Section 45(3) of

the Customs Act, 1962 (for short, “the Customs Act”) in respect of

goods which were pilfered whilst in its custody during the years

1996-2000. Each of the said notices related to different events of

pilferage during the years 1996-2000. The said show cause-cum-

demand notices were adjudicated upon and orders dated

06.11.1997, 02.10.1997, 06.10.1997, and 17.05.2001 (for short,

“orders-in-original”) were passed confirming the duty demanded in

terms of the show cause-cum-demand notices.

2.1 In the interregnum, a Notification dated 11.10.2000 and a

Public Notice dated 11.10.2000 were also issued, by which the

Commissioner of Customs (Import) in exercise of powers conferred

on him under section 45(1) of the Customs Act declared the

Mumbai Port Trust (“MbPT”) as a “custodian” of the area notified

under Section 8 of the Customs Act for statutory duties and

responsibility prescribed, inter alia, under Section 45 of the

Customs Act.

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2.2 Aggrieved by the aforesaid orders-in-original, the respondent

preferred appeals before the Commissioner of Customs (Appeals).

By common order dated 30.07.2002, the Commissioner of Customs

(Appeals) dismissed the appeals and affirmed the orders -in-

original.

2.3 Aggrieved, the respondent-Port Trust filed Writ Petition No.

1278/2003 before the Bombay High Court challenging the

common order dated 30.07.2002 passed by the Commissioner of

Customs (Appeals) as also the Notification dated 11.10.2000. By

order dated 28.07.2009, the Bombay High Court allowed the said

writ petition by holding that under Section 45(1) of the Customs

Act, the recovery of duty in respect of pilfered goods is only from

the person approved by the Commissioner of Customs and not

from a body of persons constituted under law and entrusted with

the custody of goods, namely, the Mumbai Port Trust incorporated

under the Major Port Trusts Act. Accordingly, the orders confirming

duty dated 06.11.1997, 02.10.1997, 06.10.1997, and 17.5.2001

were set aside and the Notification dated 11.10.2000 was also held

to be without jurisdiction and ultra vires Section 45(1) of the

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Customs Act. The Union of India and others are in appeal before

us against the said order.

Contentions:

Appellants

3. Learned counsel Sri V. Chandrashekara Bharati appearing

for the appellants submitted as follows:

3.1.1 The saving words in Section 45(1) of the Customs Act,

“save as otherwise provided in any law for the time being in force”,

do not exclude the Customs Commissioner from approving a

person in whose custody imported goods are to remain and who

shall, for that reason, be liable to pay duty in respect of them under

Section 45(3), merely because another statute, namely the Major

Port Trusts Act, also places imported goods in the custody of that

person.

3.1.2 The fact that the respondent-Port Trust derives custody

from the Major Port Trusts Act does not make it immune from

payment of import duty under the Customs Act.

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3.1.3 In fact, the purpose of the saving clause is to ensure

that, once a person is approved under Section 45(1), that person

bears the liability for customs duty on pilfered goods while in its

custody, irrespective of any other statutory arrangement governing

custody.

3.1.4 The notification dated 11.10.2000 was merely an

exercise of power expressly conferred by Section 45(1), approving

Mumbai Port Trust as the custodian of the notified customs area.

It was, therefore, not without jurisdiction.

3.1.5. The impugned judgment, to the extent it holds

otherwise, is liable to be set aside.

Respondent

3.2. Per contra, learned Senior Counsel Sri Rakesh Khanna and

Counsel for the respondents submitted as follows:

3.2.1 The respondent-Port Trust’s custody of imported goods

flows from the Major Port Trusts Act.

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3.2.2 The liability to pay duty on pilfered goods under Section

45(3) of the Customs Act falls upon the person referred to in sub-

section (1), i.e. the person approved under Section 45(1).

3.2.3 However, the Commissioner had no power to approve

the respondent-Port Trust in the first place because its custody was

governed by the Major Port Trusts Act. Therefore, Section 45(3)

cannot independently create liability against it. In other words, the

Custom Commissioner’s power under Section 45(1) is said to be

confined to cases where custody is not already prescribed by

another law.

3.2.4 Since the Commissioner exceeded his jurisdiction under

Section 45(1) in declaring the respondent-Port Trust a custodian

for the purposes of payment of duty in terms of Section 45(3), the

High Court was correct in holding the notification dated

11.10.2000 to be without jurisdiction and ultra vires.

3.2.5 Alternatively, it was submitted that the notification is

dated 11.10.2000 whereas the claim for import duty in respect of

pilfered goods is prior to the said date. Therefore, the notification

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does not apply to the period prior to its date. Hence, no customs

duty on the pilfered goods for the period prior to 11.10.2000 can

be collected from the respondent-Port Trust. Hence, there is no

merit in this appeal.

3.3 As is clear, the show cause-cum-demand notices in the

present case pertain to instances of pilferage which occurred prior

to the issuance of the Notification dated 11.10.2000. Since the

respondent 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. Learned 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 is

confined to the correctness of the High Court's declaration that the

Notification dated 11.10.2000 issued under Section 45(1) of the

Customs Act is without jurisdiction and ultra vires the said

provision.

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Question for consideration:

3.4 The question which, therefore, falls for our consideration is,

whether, the Notification dated 11.10.2000 approving the

respondent-Port Trust as the custodian of the notified customs

area under Section 45(1) of the Customs Act is valid and

consequently liability for pilfered goods could be fastened on the

respondent in terms of the impugned Notification dated

11.10.2000 as per Section 45(3) of the Customs Act.

Statutory Framework:

4. Having noticed the controversy which arises in the present

appeal, it is necessary to examine the statutory framework

governing the custody of imported goods under the Customs Act

and the Major Port Trusts Act.

(a) Customs Act:

4.1 The Customs Act was enacted to consolidate and amend the

law relating to customs by replacing the Sea Customs Act, 1878,

which had governed the field for over eight decades. Several

provisions of the earlier enactment had become obsolete,

difficulties had arisen in its implementation, trade had sought

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procedural reforms and greater facilitation and the increasing

incidence of smuggling had necessitated a comprehensive revision

of the customs law. It was also considered necessary to consolidate

within a single enactment the law relating to sea, land and air

customs which had until then been governed by different statutes

and rules. Accordingly, Parliament enacted the Customs Act as a

comprehensive code regulating the levy and collection of customs

duties, the import and export of goods, and the custody and control

of imported goods until their lawful clearance. The Customs Act

came into effect from 01.02.1963.

4.2 The relevant provisions of the Customs Act for the purpose

of this case are extracted as under:

“2. Definitions.—In this Act, unless the context otherwise

requires,—

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(11) “customs area” means the area of a customs station

or a warehouse and includes any area in which imported

goods or exported goods are ordinarily kept before

clearance by Customs Authorities;

(12) “customs port” means any port appointed under

clause (a) of section 7 to be a customs port, and includes

a place appointed under clause (aa) of that section to be

an inland container depot;

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(13) “customs station” means any customs port, customs

airport, international courier terminal, foreign post office

or land customs station;

(14) “dutiable goods” means any goods which are

chargeable to duty and on which duty has not been paid;

(15) “duty" means a duty of customs leviable under this

Act;

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(25) “imported goods” means any goods brought into India

from a place outside India but does not include goods

which have been cleared for home consumption;

(26) “importer”, in relation to any goods at any time

between their importation and the time when they are

cleared for home consumption, includes any owner,

beneficial owner or any person holding himself out to be

the importer;

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(34) “proper officer”, in relation to any functions to be

performed under this Act, means the officer of customs

who is assigned those functions by the Board or the

Principal Commissioner of Customs or Commissioner of

Customs under section 5.

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(43) “warehouse” means a public warehouse appointed

under section 57 or a private warehouse licensed under

section 58;

(44) “warehoused goods” means goods deposited in a

warehouse;

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8. Power to approve landing places and specify limits

of customs area.— The Principal Commissioner of

Customs or Commissioner of Customs may,—

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(a) approve proper places in any customs port or customs

airport or coastal port for the unloading and loading of

goods or for any class of goods;

(b) specify the limits of any customs area.

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12. Dutiable goods.— (1) Except as otherwise provided in

this Act, or any other law for the time being in force, duties

of customs shall be levied at such rates as may be specified

under the Customs Tariff Act, 1975 (51 of 1975), or any

other law for the time being in force, on goods imported

into, or exported from, India.

(2) The provisions of sub-section (1) shall apply in respect

of all goods belonging to Government as they apply in

respect of goods not belonging to Government.

13. Duty on pilfered goods.— If any imported goods are

pilferred after the unloading thereof and before the proper

officer has made an order for clearance for home

consumption or deposit in a warehouse, the importer shall

not be liable to pay the duty leviable on such goods except

where such goods are restored to the importer after

pilferage.

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23. Remission of duty on lost, destroyed or abandoned

goods.— (1) Without prejudice to the provisions of section

13, where it is shown to the satisfaction of the Assistant

Commissioner of Customs or Deputy Commissioner of

Customs that any imported goods have been lost

(otherwise than as a result of pilferage) or destroyed, at any

time before clearance for home consumption, the Assistant

Commissioner of Customs or Deputy Commissioner of

Customs shall remit the duty on such goods.

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(2) The owner of any imported goods may, at any time

before an order for clearance of goods for home

consumption under section 47 or an order for permitting

the deposit of goods in a warehouse under section 60 has

been made, relinquish his title to the goods and thereupon

he shall not be liable to pay the duty thereon:

Provided that the owner of any such imported goods shall

not be allowed to relinquish his title to such goods

regarding which an offence appears to have been

committed under this Act or any other law for the time

being in force.

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45. Restrictions on custody and removal of imported

goods.— (1) Save as otherwise provided in any law for the

time being in force, all imported goods unloaded in a

customs area shall remain in the custody of such person

as may be approved by the Principal Commissioner of

Customs or Commissioner of Customs until t hey are

cleared for home consumption or are warehoused or are

transhipped in accordance with the provisions of Chapter

VIII.

(2) The person having custody of any imported goods in a

customs area, whether under the provisions of sub-section

(1) or under any law for the time being in force,—

(a) shall keep a record of such goods and send a copy

thereof to the proper officer;

(b) shall not permit such goods to be removed from the

customs area or otherwise dealt with, except under

and in accordance with the permission in writing of

the proper officer or in such manner as may be

prescribed.

(3) Notwithstanding anything contained in any law for the

time being in force, if any imported goods are pilferred after

unloading thereof in a customs area while in the custody

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of a person referred to in sub-section (1), that person shall

be liable to pay duty on such goods at the rate prevailing

on the date of delivery of an arrival manifest or import

manifest or, as the case may be, an import report to the

proper officer under section 30 for the arrival of the

conveyance in which the said goods were carried.

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47. Clearance of goods for home consumption. — (1)

Where the proper officer is satisfied that any goods entered

for home consumption are not prohibited goods and the

importer has paid the import duty, if any, assessed

thereon and any charges payable under this Act in respect

of the same, the proper officer may make an order

permitting clearance of the goods for home consumption:

Provided that such order may also be made electronically

through the customs automated system on the basis of

risk evaluation through appropriate selection criteria:

Provided further that the Central Government may, by

notification in the Official Gazette, permit certain class of

importers to make deferred payment of said duty or any

charges in such manner as may be provided by rules.

(2) The importer shall pay the import duty—

(a) on the date of presentation of the bill of entry in the

case of self assessment; or

(b) within one day (excluding holidays) from the date on

which the bill of entry is returned to him by the proper

officer for payment of duty in the case of assessment,

reassessment or provisional assessment; or

(c) in the case of deferred payment under the proviso to

sub-section (1), from such due date as may be

specified by rules made in this behalf,

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and if he fails to pay the duty within the time so specified,

he shall pay interest on the duty not paid or short-paid till

the date of its payment, at such rate, not less than ten per

cent. but not exceeding thirty-six per cent. per annum, as

may be fixed by the Central Government, by notification in

the Official Gazette.

Provided that the Central Government may, by notification

in the Official Gazette, specify the class or classes of

importers who shall pay such duty electronically:

Provided further that where the bill of entry is returned for

payment of duty before the commencement of the Customs

(Amendment) Act, 1991 and the importer has not paid

such duty before such commencement, the date of return

of such bill of entry to him shall be deemed to be the date

of such commencement for the purpose of this section:

Provided also that if the Board is satisfied that it is

necessary in the public interest so to do, it may, by order

for reasons to be recorded, waive the whole or part of any

interest payable under this section.

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141. Conveyances and goods in a customs area subject

to control of officers of customs. — (1) All the

conveyances and goods in a customs area shall, for the

purpose of enforcing the provisions of this Act, be subject

to the control of officers of customs.

(2) The imported or export goods may be received, stored,

delivered, despatched or otherwise handled in a customs

area in such manner as may be prescribed and the

responsibilities of persons engaged in the aforesaid

activities shall be such as may be prescribed.

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160. Repeal and savings.—

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(9) Nothing in this Act shall affect any law for the time

being in force relating to the constitution and powers of

any Port authority in a major port as defined in the Indian

Ports Act, 1908 (15 of 1908).”

(b) Major Port Trusts Act:

4.3 Earlier there were six major ports in the country, namely,

Calcutta, Bombay, Madras, Visakhapatnam, Cochin and Kandla.

The first three were administered by Port Trusts while the latter

three were administered by the Government of India. The Port

Trusts at the three ports of Calcutta, Bombay and Madras were

statutory bodies. The remaining three ports of Visakhapatnam,

Cochin and Kandla were under the immediate charge of a Port

Administrative Officer appointed by the Central Government who

had been vested with powers similar to those of a Head of a

Department. These powers were limited in nature and the Port

Administrative Officer had to obtain the orders of the Central

Government on many matters, which could normally be disposed

of at local level in the Port Trusts. Commercial and trade interests,

especially at Visakhapatnam and Cochin had also been agitating

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that they should have a direct voice in the administration of those

ports. Keeping in view that statutory Port Trusts were successfully

administered, it was proposed to constitute Port Trusts at

Visakhapatnam, Cochin and Kandla also. Accordingly, the Major

Port Trusts Bill was introduced in the Parliament. The Major Port

Trusts Bill having been passed by both the Houses of Parliament,

received the assent of the President on 16.10.1963. It was brought

on the Statute Book as the Major Port Trusts Act, 1963 (38 of 1963)

with effect from 29.02.1964.

4.4 The relevant provisions of the Major Port Trusts Act, 1963

are extracted as under:

“2. Definitions.- In this Act, unless the context otherwise

requires,-

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(b) "Board", in relation to a port, means the Board of

Trustees constituted under this Act for that port;

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(d) "Collector of Customs" has the same meaning as in the

Customs Act, 1962;

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(j) "Indian Ports Act" means the Indian Ports Act, 1908 (15

of 1908);

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(m) "major port" has the same meaning as in the Indian

Ports Act;

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(o) "owner", (i) in relation to goods, includes any consignor,

consignee, shipper or agent for the sale, custody, loading

or unloading of such goods; and (ii) in relation to any vessel

or any aircraft making use of any port, includes any part-

owner, charterer, consignee, or mortgagee in possession

thereof,

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(q) "port" means any major port to which this Act applies

within such limits as may, from time to time, be defined by

the Central Government for the purposes of this Act by

notification in the Official Gazette, and, until a notification

is so issued, within such limits as may have been defined

by the Central Government under the provisions of the

Indian Ports Act;

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(y) "Trustee", in relation to a port, means a member of the

Board constituted for the port;

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42. Performance of services by Board or other person.-

(1) A Board shall have power to undertake the following

services:-

(a) landing, shipping or transhipping passengers and

goods between vessels in the port and the

wharves, piers, quays or docks belonging to or in

the possession of the Board;

(b) receiving, removing, shifting, transporting, storing

or delivering goods brought within the Board's

premises;

(c) carrying passengers by rail or by other means

within the limits of the port or port approaches,

subject to such restrictions and conditions as the

Central Government may think fit to impose;

(d) receiving and delivering, transporting and booking

and despatching goods originating in the vessels

in the port and intended for carriage by the

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neighbouring railways, or vice versa, as a railway

administration under the Indian Railways Act,

1890 (9 of 1890);

(e) piloting, hauling, mooring, remooring, hooking, or

measuring of vessels or any other service in

respect of vessels; and

(f) developing and providing, subject to the previous

approval of the Central Government,

infrastructure facilities for ports.

(2) A Board may, if so requested by the owner, take charge

of the goods for the purpose of performing the service or

services and shall give a receipt in such form as the Board

may specify.

(3) Notwithstanding anything contained in this section, the

Board may, with the previous sanction of the Central

Government, authorise any person to perform any of the

services mentioned in sub-section (1) on such terms and

conditions as may be agreed upon.

(3A) Without prejudice to the provisions of sub-section (3),

a Board may, with the previous approval of the Central

Government, enter into any agreement or other

arrangement, (whether by way of partnership, joint

venture or in any other manner) with, any body corporate

or any other person to perform any of the services and

functions assigned to the Board under this Act on such

terms and conditions as may be agreed upon.

(4) No person authorised under sub -section (3) shall

charge or recover for such service any sum in excess of the

amount specified by the Authority, by notification in the

Official Gazette.

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(5) Any such person shall, if so required by the owner,

perform in respect of goods any of the said services and for

that purpose take charge of the goods and give a receipt in

such form as the Board may specify.

(6) The responsibility of any such person for the loss,

destruction or deterioration of goods of which he has taken

charge shall, subject to the other provisions of this Act, be

that of a bailee under sections 151, 152 and 161 of the

Indian Contract Act, 1872 (9 of 1872).

(7) After any goods have been taken charge of and a receipt

given for them under this section, no liability for any loss

or damage which may occur to them shall attach to any

person to whom a receipt has been given or to the master

or owner of the vessel from which the goods have been

landed or transhipped.

43. Responsibility of Board for loss, etc., of goods.- (1)

Subject to the provisions of this Act, the responsibility of

any Board for the loss, destruction or deterioration of

goods of which it has taken charge shall,-

(i) in the case of goods received for carriage by

railway, be governed by the provisions of the

Indian Railways Act, 1890 (9 of 1890); and

(ii) in other cases, be that of a bailee under sections

151, 152 and 161 of the Indian Contract Act, 1872

(9 of 1872), omitting the words "in the absence of

any special contract" in section 152 of that Act :

Provided that no responsibility under this section shall

attach to the Board-

(a) until a receipt mentioned in sub-section (2) of

section 42 is given by the Board; and

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(b) after the expiry of such period as may be

prescribed by regulations from the date of taking

charge of such goods by the Board.

(2) A Board shall not be in the way responsible for the

loss, destruction or deterioration of, or damage to, goods

of which it has taken charge, unless notice of such loss or

damage has been given within such period as may be

prescribed by regulations made in this behalf from the date

of taking charge of such goods by the Board under sub-

section (2) of section 42.

44. Accommodation to be provided for customs

officers in wharves, etc., appointed under Customs

Act.—Where the Collector of Customs has, under the

provisions of any Act for the levy of duties of customs,

appointed any dock, berth, wharf, quay, stage, jetty, pier,

warehouse or shed or a portion of any warehouse or shed

provided. at any port under the provisions of this Act for

the use of sea-going vessels to be an approved place for the

landing or shipping of goods or a warehouse for the storing

of dutiable goods on the first importation thereof without

payment of duty, within the meaning of the first -

mentioned Act, the Board shall set apart and maintain

such place on or adjoining such dock, wharf, quay, stage,

jetty or pier, or in such warehouse or shed or portion

thereof, for the use of officers of customs as may be

necessary.

45. Dues at customs wharves, etc. —Notwithstanding

that any dock, berth, wharf, quay, stage, jetty, pier,

warehouse or shed or portion thereof at any port has,

under the provisions of section 44, been set apart for the

use of the officers of customs at the port, all rates and

other charges payable under this Act in respect thereof, or

for the storage of goods therein, shall be payable to the

Board, or to such person or persons as may be appointed

by the Board to receive the same.

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128. Saving of right of Central Government and

municipalities to use wharves, etc., for collecting

duties and of power of Customs Officers. - Nothing in

this Act shall affect-

(1) the right of the Central Government to collect

customs duties or of any municipality to collect

town duties at any dock, berth, wharf, quay, stage,

jetty or pier in the possession of a Board, or

(2) any power or authority vested in the customs

authorities under any law for the time being in

force.

(c) Notification:

4.5 The Notification dated 11.10.2000 which was quashed by the

High Court reads as under:

“Appraising (General)

New Custom House.

Ballard Estate,

Mumbai-400 038.

Date: 11.10.2000

NOTIFICATION

Sub: Declaration of area known as Mumbai Docks at

Mumbai as customs area

Notwithstanding anything contained in the any

Notification/ Public Notice/ Orders issued under the Sea

Customs Act, 1879, relating to the declaration of various

land packets as a "customs area" in the Mumbai Docks

which are operational at present as a combined effect of

section 6 and section 24 of General Clauses Act 1897, and

deemed to have been issue under Customs Act, 1962;

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Also, notwithstanding anything contained in any

Notification/Public Notice Orders, issued under the Sea

Customs Act, 1878, which are operational, at present by

virtue of section 160 of Customs Act. 1962 and deemed to

have been issued under Customs Act 1962;

And also notwithstanding anything contained in any

Notification/Public Notice/orders, issued under the Sea

Customs Act, 1878, appointing MbPT, as a custodian

under the Sea Customs Act, 1878, which are operational

at present by verger of the combined effect of section 6 and

section 24 of General Clauses Act, 1897, which are deemed

to have been appointed as custodian of imported goods

under section 45(l) of Customs Act. 1962.

I, K.P Singh, Commissioner of Customs (Import), New

Custom House, Mumbai, In exercise of the powers

conferred on me by section 8 of Customs Act. 1962, hereby

notify that the area known a “India Docks" Princess

Docks". "Victoria Docks'' of the Sea, Mumbai, mentioned

in the schedule below, as a "Customs area' for the

purposes of handling import and export charge and

facilitating movement of container traffic from within the

Docks to outlying CFS. ICD areas: subject to the following

conditions:-

(1) The said customs area shall remain under the custody

of MbPT;

(2) The MbPT shall make adequate arrangements for

loading/unloading storage, movement, safety and

security of the imported and export charge.

(3) The MbPT shall provide proper and adequate

infrastructure facilities for the customs offices and

customs officers within the 'foreside areas at

appropriate plea and at the entry and exit gives of the

aforesaid area.

(4) The MbPT should ensure adequate lighting & f ire-

fighting equipments within and/or in the vicinity of

area referred.

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(5) The MbPT shall follow the directions issued by

Commissioner of Customs from time to time u/s. 45

of Customs Act. 1962.

SCHEDULE

NAME OF

THE PORT

PLACE LIMITS

Mumbai

Sea Port

Places and

areas of

MbPT known

as Indira

Docks

Vicrotia

Docks

Princess

Docks

Area enclosed by the

Mumbai Port Trust, Docks

boundary walls (old as well

as new) connecting Naval

Dock Yard. Green Gate,

Grey, Blue Gate, Purple

Gate, White Gate, Orange

Gate, Yellow Gage extended

upto Mallet Basin.

Further, in exercise of the powers conferred on me by

section 45(1) of Customs Act, 1962, I approve MbPT as a

custodian of the aforesaid customs area in respect of all

imported goods and order that the custodian shall be

responsible for the statutory duties and responsibilities

prescribed under Section 45(2) and 45(3) of Customs Act,

1962.

This Notification is issued in order to consolidate and

integrate the various "Customs areas" notified from time to

time under the Sea Customs Act, 1878 and Customs Act,

1962.

Sd/-

(K. P.SINGH )

COMMISSIONER OF CUSTOMS (IMPORT)

NEW CUSTOM HOUSE

MUMBAI.

Issued from F.No.S/26-238/2000 A(G)”

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Conundrum:

5. As is evident from a plain reading of the above, Section 45 of

the Customs Act regulates the custody of imported goods unloaded

in a customs area until they are cleared for home consumption,

warehoused or transhipped. While sub-section (1) empowers the

Principal Commissioner of Customs or Commissioner of Customs

to approve the person in whose custody such goods shall remain,

subject to the saving clause, “save as otherwise provided in any

law for the time being in force”, sub-section (3), inserted by Act 22

of 1995, fastens liability to pay customs duty on pilfered goods

upon the person so approved and commences with the non

obstante clause, “notwithstanding anything contained in any law for

the time being in force”.

5.1 The controversy in the present case arises as the respondent-

Port Trust contends that its custody of imported goods is derived

directly from the Major Port Trusts Act. Consequently, according to

the respondent, the saving clause in sub-section (1) precluded the

Commissioner from approving the respond ent-Port Trust as a

custodian under the Notification dated 11.10.2000 and from

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fastening upon it the liability contemplated under Section 45(3).

The appellants, on the other hand, contend that the very purpose

of introducing sub-section (3) with a non obstante clause was to

ensure that, notwithstanding any other law governing the custody

of imported goods, the person approved under Section 45(1) would

be liable to pay customs duty on pilfered goods as provided under

Section 45(3). The question, therefore, is whether the statutory

scheme under the Major Port Trusts Act excludes the exercise of

the Commissioner’s power under Section 45(1), or whether the

liability created by Section 45(3) nevertheless attaches to the

respondent upon such approval.

Analysis:

6. We propose to examine the controversy from first principles.

Accordingly, we shall first discuss the rival meanings and

implications of a saving clause versus a non obstante clause.

6.1 The expression “notwithstanding anything in any other law”

occurring in a Section of an Act cannot be construed to take away

the effect of any provision of the Act in which that Section occurs.

26

Patanjali Shashtri, CJ in Aswini Kumar Ghosh vs.

Arabinda Bose, AIR 1952 SC 369, observed that “it should first

be ascertained what the enacting part of the section provides on a

fair construction of the words used according to their natural and

ordinary meaning, and the non obstante clause is to be understood

as operating to set aside as no longer valid anything contained in

relevant existing laws which is inconsistent with the new

enactment.”

In Dominion of India vs. Shrinbai A. Irani, AIR 1954 SC

596, it was observed as under:

“…the non obstante clause need not necessarily and

always be co-extensive with the operative part, so as to

have the effect of cutting down the clear terms of an

enactment. If the words of the enactment are clear and are

capable of only one interpretation on a plain and

grammatical construction of the words thereof, a non

obstante clause cannot cut down that construction and

restrict the scope of its operation. In such cases the non

obstante clause has to be read as clarifying the whole

position and must be understood to have been

incorporated in the enactment by the legislature by way of

abundant caution and not by way of limiting the ambit and

scope of the operative part of the enactment. …”

6.2 The words, “any other law” will necessarily refer to any law

other than the Act in which that Section occurs. By contrast, “any

27

law for the time being in force” also includes anything provided in

the enactment in which those words occur.

6.3 Applying the above principles to the provisions under

consideration, it is noted that in sub-section (1) of Section 45 of the

Customs Act, what is envisaged is that the Principal Commissioner

of Customs or Commissioner of Customs shall approve the person

in whose custody all imported goods unloaded in a customs area

shall remain until they are cleared for home consumption or are

warehoused or are transhipped in accordance with the provisions

of Chapter VIII. The object of the said sub-section is to fix the

responsibility on such person as may be notified in that behalf by

the Principal Commissioner of Customs or Commissioner of

Customs. In the instant case, the Notification dated 11.10.2000

has, in fact, been issued approving Mumbai Port Trust as such a

person. Mumbai Port Trust, being such juristic person, so

approved by the Principal Commissioner of Customs or

Commissioner of Customs under sub -section (1) of Section 45,

having custody of any imported goods in a customs area, is,

therefore, obligated to do certain things and prevent certain other

28

things from happening as per sub-section (2) of Section 45 of the

Customs Act.

6.4 Sub-section (3), which is added to Section 45 of the Customs

Act by an amendment w.e.f. 26.05.1995 states that if any goods

are pilfered after unloading in a customs area while in the custody

of a person referred to in sub-section (1) of Section 45 of the said

Act, that person shall be liable to pay duty on such pilfered goods

at the rate prevailing on the date of delivery of an arrival manifest

or import manifest or, as the case may be, an import report to the

proper officer under Section 30 for the arrival of the conveyances

in which the said goods were carried. Sub-section (3) of Section 45

of the said Act aims to levy customs duty vis-à-vis pilfered goods.

At this point, we may also mention that Section 13 of the same Act

states that if any imported goods are pilfered after the unloading

thereof but before the proper officer has made an order for

clearance for home consumption or deposit in a warehouse, the

importer shall not be liable to pay the duty leviable on such goods

except where such goods are restored to the importer after

pilferage. Since the importer of the goods is not liable to pay the

29

duty leviable on pilfered goods except when such goods are restored

to the importer, the obligation is cast on the person approved by

the Principal Commissioner of Customs or Commissioner of

Customs as notified under sub-section (1) of Section 45 of the

Customs Act to pay the duty on such pilfered goods.

6.5 What is important to note is that sub-section (3) of Section

45 was inserted w.e.f. 26.05.1995 and it begins with a non obstante

clause. Prior to the insertion of the said sub-section, no duty as

such was liable to be paid on pilfered goods under the Customs

Act. Consequently, an obligation to pay customs duty on such

goods has been cast upon the person referred to in sub-section (1)

of Section 45. In order to fasten such an obligation on a person, a

notification under sub-section (1) of Section 45 is a necessary

concomitant. At the same time, the approval contemplated under

sub-section (1) operates only by way of an exception, that is, where

there is “nothing otherwise contained in any other law for the time

being in force”. In other words, sub-section (1) enacts a saving

clause. Thus, if any other enactment prescribes that a particular

person shall remain in custody of the imported goods unloaded in

30

a customs area and also fastens custom duty for pilfered goods on

them, then the Principal Commissioner of Customs or

Commissioner of Customs has no powers to approve any other

person for the purpose of payment of customs duty under Section

45(3) of the Act and thus cannot issue a notification under Section

45(1). It is only when under any other law for the time being in

force, no person has been fastened with a liability to pay customs

duty in respect of pilfered goods that the Principal Commissioner

of Customs or the Commissioner of Customs can approve, by

notification, a person under sub-section (1) of Section 45 of the

Customs Act, to assume the obligation contemplated under sub-

sections (2) and (3) of the Section 45 of the Customs Act.

6.6 It is, therefore, necessary to ascertain whether any other law

for the time being in force prescribes the responsibility of the

custodian of imported goods unloaded in a customs area in respect

of pilfered goods. If no such provision exists, the Principal

Commissioner of Customs or Commissioner of Customs may

approve a person under sub-section (1), who would thereafter

discharge the duties under sub-section (2) and incur the liability

31

under sub-section (3) of Section 45. It thus becomes necessary to

examine the provisions of the Major Port Trusts Act, under which

the respondent-Bombay Port Trust is constituted, to ascertain

whether that enactment provides such a statutory scheme.

6.7 The Major Port Trusts Act, was enacted to make provision for

the constitution of port authorities for certain major ports in India

and to vest the administration, control and management of such

ports in such authorities and for matters connected therewith.

Bombay Port is a major port within the meaning of Section 2(m) of

the Major Port Trusts Act read with Indian Ports Act. Section 2(o)

thereof defines “owner” as under:

“(o) "owner", (i) in relation to goods, includes any

consignor, consignee, shipper or agent for the sale,

custody, loading or unloading of such goods; and (ii)

in relation to any vessel or any aircraft making use of

any port, includes any part -owner, charterer,

consignee, or mortgagee in possession thereof.”

6.8 Chapter V of the Major Port Trusts Act deals with works and

services to be provided at Ports. Section 35 deals with the power

of the Board to execute works and provide appliances while Section

42 deals with performance of services by the Board or other person.

Section 42 of the Major Port Trusts Act is extracted above.

32

6.9 As is evident, clauses (a) and (b) of sub-section (1) of Section

42 of the Major Port Trusts Act, inter alia, deal with goods brought

within the Board premises. Sub-section (2) of Section 42 states that

a Board may, if so requested by the owner, take charge of the goods

for the purpose of performing the service or services and shall give

a receipt in such form as the Board may specify. The Board can

also authorise any person to perform any of the services mentioned

in sub-section (1) of Section 42 of the said Act on such terms and

conditions as may be agreed upon with the previous sanction of

the Central Government. Similarly, a Board may, with the previous

approval of the Central Government, enter into any agreement or

other arrangement with anybody, corporate or any other person, to

perform any of the services and functions assigned to the Board

under the said Act on such terms and conditions as may be agreed

upon. Any such person shall, if so required by the owner, perform

in respect of goods any of the said services and for that purpose

take charge of the goods and give a receipt in such form as the

Board may specify. The responsibility of any such person for the

loss, destruction or deterioration of goods of which he has taken

33

charge shall, subject to the other provisions of the said Act, be that

of a bailee under Sections 151, 152 and 161 of the Indian Contract

Act, 1872 (for short, “Contract Act”). Once the Board has taken

charge of the goods and issued the prescribed receipt, the master

or owner of the vessel is discharged from any liability for loss or

damage to such goods thereafter. Therefore, Section 42 of the Major

Port Trusts Act fastens the liability in respect of the goods received,

either on the Board which has taken charge of the goods as

requested by the owner thereof or a person authorised by the Board

on the terms and conditions agreed upon with the previous

sanction of the Central Government. Any loss caused to the goods

is as that of a bailee under sections 151, 152 and 161 of the Indian

Contract Act, 1872.

6.10 Section 43 of the Major Port Trusts Act provides that,

subject to the provisions of that Act, the responsibility of the Board

for the loss, destruction or deterioration of goods of which it has

taken charge shall, inter alia, be that of a bailee under Sections

151, 152 and 161 of the Contract Act omitting the words “in the

absence of any special contract” occurring in Section 152 thereof.

34

Such responsibility, however, is subject to the conditions

stipulated in Section 43 itself, namely:

(i) that a receipt referred to in sub-section (2) of Section

42 of the Major Port Trusts Act has been issued by the

Board; and

(ii) that such responsibility ceases upon the expiry of the

period prescribed by the regulations from the date on

which the Board took charge of the goods.

(iii) Further, under sub-section (2) of Section 43, the

Board shall not be responsible for the loss,

destruction, deterioration or damage to goods of which

it has taken charge unless notice of such loss or

damage is given within the period prescribed by the

regulations from the date of taking charge of the goods

under Section 42(2).

6.11 Section 44 of the Major Port Trusts Act, in turn, requires

the Board to provide and maintain accommodation for customs

officers at docks, wharves, warehouses and other approved places

used for the landing, shipping or storage of dutiable goods.

35

Correspondingly, Section 45 provides that the rates and other

charges in respect of such accommodation or the storage of goods

shall be payable to the Board or to such person as may be

appointed by the Board.

6.12 On a conspectus reading of Sections 42 to 45 of the Major

Port Trusts Act, it becomes clear that only if a receipt in terms of

sub-section (2) of Section 42 is issued by the Board to the owner of

the goods, the Board is responsible for the loss, destruction or

deterioration of the goods of which it has taken charge. In such a

case the Board becomes a bailee within the meaning of Section 148

of the Contract Act, which reads as under:

“148. ‘Bailment’, ‘bailor’ and ‘bailee’ defined.—

A ‘bailment’ is the delivery of goods by one person to

another for some purpose, upon a contract that they shall,

when the purpose is accomplished, be returned or

otherwise disposed of according to the directions of the

person delivering them. The person delivering the goods is

called the ‘bailor’. The person to whom they are delivered

is called the ‘bailee’.

Explanation.—If a person is already in possession of

the goods of other contracts to hold them as a bailee, he

thereby becomes the bailee, and the owner becomes the

bailor of such goods, although they may not have been

delivered by way of bailment.”

36

6.13 The duty to take care by the bailee of the goods i.e. the Board

in the instant case under Sections 151, 152 and 161 of the

Contract Act would apply in terms of Section 43(1)(ii) of the Major

Port Trusts Act. For ease of reference, the said Sections are

extracted as under:

“151. Care to be taken by bailee. —

In all cases of bailment, the bailee is bound to take as

much care of the goods bailed to him as a man of ordinary

prudence would, under similar circumstances, take of his

own goods of the same bulk, quality and value as the goods

bailed.

152. Bailee when not liable for loss, etc., of thing

bailed. —

The bailee, (in the absence of any special contract), is

not responsible for the loss, destruction or deterioration of

the thing bailed, if he has taken the amount of care of it

described in section 151.

xxx

161. Bailee’s responsibility when goods are not duly

returned.—

If by the fault of the bailee, the goods are not returned,

delivered or tendered at the proper time, he is responsible

to the bailor for any loss, destruction or deterioration of

the goods from that time.”

6.14 Section 161 of the Contract Act deals with loss, destruction

or deterioration of the goods by the fault of the bailee resulting in

37

the non-return of the goods, tendered or delivered at the proper

time by fastening the liability on the bailee. The Board of a Major

Port, as a bailee, is responsible under Section 43 of the Major Port

Trusts Act read with Sections 151, 152 and 161 of the Contract

Act. Now, this responsibility is subject to the conditions precedent,

which have been extracted above.

6.15 If the conditions precedent do not apply, then the Board as

a bailee would have no responsibility under Sections 151, 152 and

161 of the Contract Act.

6.16 A case of loss of goods owing to pilferage of the goods is a

case covered under Section 13 of the Customs Act, as stated

earlier, which for ease of reference reads as under:

“13. Duty on pilfered goods.—If any imported goods are

pilfered after the unloading thereof and before the proper

officer has made an order for clearance for home

consumption or deposit in a warehouse, the importer shall

not be liable to pay the duty leviable on such goods except

where such goods are restored to the importer after

pilferage.”

38

If imported goods are pilfered after unloading and before the

proper officer has made an order for clearance for home

consumption or deposit in a warehouse, the importer is not liable

to pay the duty leviable on such goods except where such goods

are restored to the importer after the pilferage. Section 13, read

with Section 45(3) of the Customs Act, contemplates that the Board

shall be liable to pay duty on such goods at the rate prevailing on

the date of delivery of the arrival manifest or import manifest, as

the case may be. Such liability arises only where a notification has

been issued under sub-section (1) of Section 45 of the Customs Act

approving the person having custody of the goods. A person who

has been notified could be a natural person notified in terms of

designation or an office held by a person. A person could also mean

a juristic person such as a body incorporated or a statutory body

such as the Board of Trustees of a Port Trust, as the respondent in

the instant case.

6.17 However, sub-section (1) of Section 45 of the Customs Act

opens with a saving clause, “save as otherwise provided in any law

for the time being in force.” Therefore, the liability of the person

39

referred to in sub-section (1) is subject to the operation of that

saving clause. Thus, if any other law for the time being in force

itself fastens liability in respect of pilfered goods upon the

custodian, such law would prevail. However, where no such

liability is provided under any other law, or where such liability is

conditional, as under Section 43 of the Major Port Trusts Act

insofar as the Board as a custodian of the goods is concerned, the

consequence would be that no customs duty would be recoverable

on pilfered goods. This is because Section 13 of the Customs Act

absolves the importer from such liability. Such an interpretation

would inevitably result in a loss of revenue through the non-

collection of customs duty on pilfered goods. It is to address this

lacuna that Parliament introduced sub-section (3) of Section 45

with effect from 26.05.1995, thereby fastening the liability to pay

duty on the person approved under sub-section (1) of Section 45,

“notwithstanding anything contained in any other law for the time

being in force”.

6.18 The liability contemplated under Section 43 of the Major

Port Trusts Act is fundamentally different from the liability created

40

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. Such liability is

compensatory in nature and governs the inter se rights and

obligations between the Board and the owner of the goods.

6.19 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. It 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.

6.20 The source, nature and object of the two liabilities are,

clearly, distinct. While the Board may remain liable as a bailee to

compensate the owner for the loss occasioned by its negligence,

Section 45(3) independently fastens upon the approved custodian

the obligation to make good the customs duty which, by virtue of

Section 13, cannot be recovered from the importer.

6.21 Viewed in this light, there is no inconsistency between the

two enactments needing to be resolved by the Court. The Major

41

Port Trusts Act regulates the Board's civil liability in respect of the

goods entrusted to it, whereas Section 45(3) of the Customs Act

safeguards the Revenue by ensuring that customs duty on pilfered

goods does not go unrealised merely because the importer stands

absolved under Section 13. The fact that the Board may have

contractual or statutory rights of indemnity or recovery against

another person responsible for the loss does not detract from its

primary statutory liability under Section 45(3) of the Customs Act

to discharge the customs duty payable to the revenue.

6.22 Sub-section (3) of Section 45 was inserted into the Customs

Act by Act 22 of 1995 with effect from 26.05.1995. Parliament

simultaneously employed a non obstante clause so as to give it an

overriding effect to the liability created thereunder. This is

notwithstanding the fact that, by virtue of the saving clause

contained in sub-section (1), the liability of the Board as custodian

in respect of the loss of goods was otherwise governed by Section

43 of the Major Port Trusts Act. Since the said liability is

conditional inasmuch as if no receipt has been issued by the Board

under sub-section (2) of Section 42 of the said Act, the liability is

42

not assumed by the Board and in a case of pilferage the customs

duty would then not be collected under the Customs Act . Sub-

section (3) of Section 45 of the Customs Act has therefore,

deliberately used a legislative device in the form of a non obstante

clause. 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.” 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, which uses the expression “save as

otherwise provided in any law for the time being in force.” Thus,

where the conditions of sub-section (3) are satisfied, the liability

created thereunder would prevail notwithstanding the provisions

of the Major Port Trusts Act as the latter does not provide for any

tax liability in the event of pilferage of goods. The only precondition

for the applicability of sub-section (3) is that the person concerned

has been approved as the custodian under sub -section (1) of

Section 45.

43

6.23 It is, no doubt, true that sub-section (1) of Section 45 of the

Customs Act contains a saving clause. Therefore, if any other law

for the time being in force creates a corresponding liability upon

the custodian in respect of pilfered goods, such provision would

ordinarily prevail. However, that is only where the liability under

the two enactments operates on the same footing. In the present

case, they do not, for two reasons. Firstly, on a comparative reading

of Section 13 read with Section 45(3) of the Customs Act and

Sections 42 and 43 of the Major Port Trusts Act, it is evident that

the liability of the Board under the latter enactment is not absolute

but is conditional, being subject to the fulfilment of the statutory

conditions prescribed therein. 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. Secondly, as already

noticed, the liability under the Major Port Trusts Act is in the

nature of a bailee's civil liability towards the owner of the goods,

whereas the liability created under Section 45(3) of the Customs

Act is a distinct statutory liability owed to the revenue. The source,

nature and object of the two liabilities are, therefore, fundamentally

44

different. It is precisely for this reason that Parliament employed

the non obstante clause in sub-section (3) of Section 45 of the

Customs Act.

6.24 As already noted, Section 43 of the Major Port Trusts Act

casts responsibility on the Board for the loss, destruction or

deterioration of goods, which would also include loss occasioned

by pilferage. However, such responsibility is conditional and arises

only upon the fulfilment of the statutory requirements prescribed

therein. If those conditions are not satisfied, no liability can be

fastened upon the Board even in a case of loss of goods by pilferage.

6.25 It is in this context that sub-section (2) of Section 45 of the

Customs Act assumes significance. The said provision imposes

statutory duties upon the person having custody of imported goods

in a customs area, whether such custody is under sub-section (1)

of Section 45 thereof or under any other law for the time being in

force, which would include the Major Port Trusts Act. The duties

prescribed under Section 45(2) of the Customs Act are noted below:

45

“45. (2)…

(a) shall keep a record of such goods and send a copy

thereof to the proper officer;

(b) shall not permit such goods to be removed from

the customs area or otherwise dealt with, except

under and in accordance with the permission in

writing of the proper officer or in such manner as

may be prescribed”

6.26 Thus, irrespective of the legal source of custody, the

custodian is under a statutory obligation to maintain proper

records of the goods and to ensure that they are neither removed

nor otherwise dealt with except with the permission of the proper

officer. Pilferage of imported goods in the customs area is a

consequence of a breach of these statutory obligations by the

person entrusted with their custody. As noticed in P. Ramanatha

Aiyar's Law Lexicon, "pilferage" means "loss or damage to stock in

a warehouse or to cargo in transit. In the case of loss it is usually

because of theft."

6.27 It is for this reason that Parliament, while introducing sub-

section (3) of Section 45 of the Customs Act, fastened the liability

to pay customs duty upon the approved custodian on pilfered

goods. The liability is attracted because the pilferage occurs while

46

the goods remain in the custody of the person entrusted with the

statutory duties under Section 45 of the Customs Act.

6.28 Consequently, on a juxtaposition of sub-sections (1), (2) and

(3) of Section 45 of the Customs Act with the provisions of the Major

Port Trusts Act, we are of the view that the Commissioner of

Customs (Import) was fully justified in issuing the Notification

dated 11.10.2000 approving the Mumbai Port Trust as the

custodian under Section 45(1) of the Customs Act. The High Court,

therefore, was not justified in holding that the Commissioner

lacked the jurisdiction to issue the said Notification and in

quashing the same.

6.29 We do not find any conflict between Section 45 of the

Customs Act and Sections 42 and 43 of the Major Port Trusts Act.

In fact, Section 23 of the Customs Act, which deals with remission

of duty on lost, destroyed or abandoned goods, expressly provides

that it operates without prejudice to Section 13 of the Customs Act

which deals with pilferage, which deals with liability in respect of

pilfered goods.

47

6.30 Thus, 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. Thus, as

discussed above, the saving clause contained in sub-section (1) of

Section 45 of the Customs Act, namely, “save as otherwise

provided in any law for the time being in force”, can be construed to

exclude the operation of the Major Port Trusts Act which deals with

loss or destruction of goods. On a reading of Section 23 of the

Customs Act, pilferage of goods in a customs area is not loss of

goods simpliciter. If it is a case of loss of goods simpliciter then the

provisions of the Major Port Trusts Act would apply having regard

to the saving clause under sub-section (1) of Section 45 of the Act.

But, as pilferage is not specifically dealt with under the provisions

of the Major Port Trusts Act and is dealt with only under the

Customs Act and duty is imposed under sub-section (3) of Section

45 of the said Act, then, the savings clause under sub-section (1)

of Section 45 would not apply. Consequently, the non obstante

clause under sub-section (3) of Section 45 is used as a legislative

device to meet such a circumstance. Therefore, any loss of goods

other than pilferage is not a subject matter of payment of customs

48

duty under Section 45 of the Customs Act. However, if it is a case

of pilferage of goods, then under sub-section (3) read with sub-

section (1) of the Customs Act, duty is indeed payable by the person

approved in terms of sub-section (1) of the Section 45 of the said

Act.

6.31 In the instant case, since Notification dated 11.10.2000 was

issued by the Commissioner of Customs precisely for the purpose

of collection of customs duty in respect of pilfered goods as

stipulated under sub-section (3), it cannot be found fault with

merely because the custody of the goods is otherwise governed by

the Major Port Trusts Act.

7. For the foregoing reasons, we hold that:

a. The Notification dated 11.10.2000 issued by the Commissioner

of Customs (Import) in exercise of the powers conferred under

Section 45(1) of the Customs Act is valid.

b. The impugned judgment dated 28.07.2009 to the extent it held

otherwise and quashed the said Notification is, therefore, set

aside.

49

c. The challenge to the quashing of the show cause-cum-demand

notices dated 18.06.1996, 02.04.1997, 28.04.1997, and

24.05.2000, pertaining to period prior to the date of the

Notification dated 11.10.2000, is not pressed by appellants’

counsel, since no liability under Section 45(3) could have

arisen in the absence of an approval under Section 45(1).

Accordingly, the impugned judgment to the extent of quashing

the show cause-cum-demand notices prior to 11.10.2000 is

not interfered with.

The appeal is accordingly disposed in the above terms. There

shall be no order as to costs.

…………………………………..J.

(B.V. NAGARATHNA)

…………………………………..J.

(MANMOHAN)

NEW DELHI;

AUGUST 25, 2026