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PETITIONER: FEDERATION OF CUSTOMS HOUSE AGENTSASSOCIATION & ORS.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT:       15/07/1996

BENCH: SINGH N.P. (J) BENCH: SINGH N.P. (J) AHMAD SAGHIR S. (J)

CITATION:  1996 SCALE  (5)368

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T N.P. SlNGH,J      The  Federation   of  Customs   House   Agents   Agents Association and  others have  filed this  appeal against the judgment of  the High  Court of  Delhi, dismissing  the writ petition filed  on behalf of the appellants, questioning the validity of  the Customs House Agents Licensing Regulations, 1984 (hereinafter referred to as the 1984 Regulations) which have been  framed by the Central Board of Excise and Customs under Section  146 of  the Customs  Act,  1962  (hereinafter referred to as the Customs Act).      It may  be mentioned  that the Customs Act repealed the Sea Customs  Act, 1878  under  which  Customs  House  Agents Licensing Rules  1960 had  been framed (hereinafter referred to as  the 1960  Rules). Rule 2 (c) of the said rule defined ’Customs House  Agent’ to mean a person licensed under those rules to  act as  agent for  the transaction of any business relating to  the entrance  or clearance of any vessel or the import or  export of  goods or baggage in any Customs House. Rule 6  prescribed the  conditions which had to be fulfilled by the  applicant before  the grant  of licence  to  act  as Customs House Agent, saying:           "6. Certain  conditions to  be      fulfilled by  the applicant  before      the grant of licence.- An applicant      for a licence shall-           (a)  furnish  to  the  Customs      Collector satisfactory  evidence as      to his  respectability,  reliabilty      and financial status;           (b)    produce    satisfactory      evidence to  the Customs  Collector      that he  would be  in a position to      muster  sufficient   clientele  and      business in  the event of his being      granted the licence.

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         (c)  furnish   an   income-tax      clearance certificate." Rule 9  laid down  the details and procedure for examination of the  applicant with  a view to ascertain his knowledge of customs law  and procedure  and his fitness to render proper service, to  importers and exporters. Such examination could be oral  or written or both. In view of Rule 10, the Customs Collector was  empowered to  reject an  application for  the grant of  a licence  to act  as Customs  House Agent, if the applicant failed  to pass  the examination  prescribed under those rules  or if the applicant was not considered suitable due to  any other  reason to  be stated  in  writing.  After coming into  force of  the Customs  Act,  the  Custom  House Agents Licensing  Regulations, 1965 (hereinafter referred to as the  1965 Regulations)  were framed  in exercise  of  the powers conferred  by sub-section  (2) of  Section 146 of the said Act.  Rule 2(c)  defined ’Custom House Agent’ to mean a person licenced  under those regulations to act as agent for the transaction  of any business relating to the entrance or clearance of  any vessel or the import or export of goods or baggage in  any Custom  House. Regulation 5 provided that an application for a licence to act as a Custom House Agent was to be  made in  the form prescribed. Regulation 6 prescribed the conditions  to be  fulfilled by the applicant before the grant of licence:           "6. Certain  conditions to  be      fulfilled by  the applicant  before      the grant of licence.- An applicant      for a licence shall-           (a) furnish  to the  Collector      of Customs  satisfactory   evidence      as  to   his   respectability   and      financial status;           (b)    produce    satisfactory      evidence  to   the   Collector   of      Customs  that  he  would  be  in  a      position   to   muster   sufficient      clientle and  business in the event      of his being granted the licence;           (c)  furnish   an  income  tax      clearance certificate. Regulation 9 contained the provision and procedure regarding examination of  the applicant  with a  view to ascertain his knowledge of  custom law  and procedure  and his  fitness to render service  to importers and exporters. This examination could be  oral or  written or  both to  be conducted  by the Collector of  Customs or  by  a  committee  of  officers  of customs to  be  appointed  by  him  for  that  purpose.  The regulations  which   were  framed   in  exercise  of  powers conferred by  sub-section (2)  of Section 146 of the Customs Act in  the year 1984 referred to above repealed the Customs House Agents  Licensing Regulations  1965.  Several  changes were introduced  in the  1984 regulations.  Regulation  2(c) defines ’Customs  House Agent’  to mean  a  person  licensed under the regulations to act as agent for the transaction of any  business   relating  to   the  entry  or  departure  of conveyance or  the import  or export of goods at any customs station. In  view of  regulation 4, the Collector may invite applications for  the grant  of a  licence to act as Customs House Agent  in the  month of January every year in the form prescribed. Regulations 6 and 8 which are the subject matter of controversy in the present appeal provided the conditions which have  to be  fulfilled by  the applicant  and conceive grant of temporary licences as well:           "6. Conditions to be fulfilled

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    by the applicant,- The applicant or      the person referred to in Cl.(b) of      sub-regulations  (2)   and  (3)  of      Regulation 5  as the  case may  be,      shall prove  to the satisfaction of      the Collector that:           (a) he  has the  experience of      work relating to clearance of goods      through the customs for a period of      not less than one year; and           (b)    the    applicant    has      financial viability  supported by a      certificate issued  by a  Scheduled      Bank or such other proof acceptable      to   the    Collector    evidencing      possession of  assets of  the value      of not  less than  Rs.1 lakh in the      case of applicants for the grant of      licence in  respect of  any one  of      the  Customs  Stations  at  Bombay,      Calcutta, Madras,  Cochin,  Kandla,      Goa,   Mangalore,    Tuticorin   or      Visakhapatnam  and  not  less  than      Rs.50,000 in  the case  of the each      of  the   other  Customs  Stations,      situated at places other than those      specified above:           Provided that in cases where a      Collector’s jurisdiction extends to      more than  one Customs  Station the      Collector may issue one licence for      all the  Stations or  more than one      such        station to be specified      in the  licence, waiving  the  need      for  separate   compliance  of  the      provisions  of  Cls.  (a)  and  (b)      above for  such additional  Customs      Stations. The  Collector  may  also      waive   the   need   for   separate      compliance of  the  requirement  of      Regulation 11 in such cases:           Provided   further   that   in      places where there is more than one      Collector  exercising  jurisdiction      over different Customs Stations and      Custom House Agents, licenced under      the Custom  House Agents  Licensing      Regulations,   1965    have    been      operating  in   the  said   Customs      Stations  on   the  basis   of  one      licence, it  shall be  open to such      agents  to   obtain   a   temporary      licence under Regulation 8 from the      Collector other  than the  one  who      has  issued   them   the   existing      licence, without  being required to      comply  with  the  requirements  of      Regulation 6 in regard to financial      viability or the requirements as to      fresh   deposit    in   terms    of      Regulation 11."           "8.   Grant    of    temporary      licence.-   Any   applicant   whose      application is  received within the      last date specified in Regulation 4

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    and who  satisfies the requirements      of Regulations  5 and  6, shall  be      permitted  to   operate  as  Custom      House Agent  at the  Custom Station      for which  the application  is made      initially for  the  period  of  one      year  against   temporary   licence      granted by  the Collector  in  this      regard in Form B.           Provided that when evidence is      produced to  the Collector that the      applicant has  already  availed  of      two chances  for qualifying  in the      written   or    oral    examination      prescribed in  these regulation and      would like  to avail  of the  third      chance  as   soon   as   the   next      examination is  held  in  terms  of      Regulation 9 and that the applicant      has been  able to  account for  the      minimum volume  of work  prescribed      for such  agents in  the course  of      one year’s  working, the  Collector      may extend  the aforesaid period of      one year  for which  the  temporary      licence has been granted by another      six months  or such  further period      not exceeding  one year  to  enable      the applicant to avail of the third      chance  for   qualifying   in   the      examination in  terms of Regulation      9. While  granting such  extension,      the  Collector   of  Customs  shall      satisfy    himself     that     the      requirements     of     Regulations      10(1)(a)  and   10(1)(b)  had  been      fully met by the applicant." On a  plain readings  in view of regulation 6, the applicant has to  prove to  the satisfaction  of the Collector that he has an  experience of  work relating  to clearance  of goods through the  customs for a period of not less than one year. Incidentally,  it  may  be  mentioned  that  clause  (a)  of Regulation  6   has   been   substituted   by   Notification No.74/9l(N.T.)-Cus., dated  15.11.1991 and  now it  read  as follows:           "6. Conditions to be fulfilled      by the applicant.- The applicant or      the person  referred to  in  clause      (b) of  sub-regulations (2) and (3)      of Regulation 5 as the case may be,      shall prove  to the satisfaction of      the Collector that:           (a)  is   an  employee   of  a      licensee and  that he  possesses  a      permanent pass in Form G prescribed      under regulation  20  and  has  the      experience  of   work  relating  to      clearance  of   goods  through  the      customs, for  a period  of not Less      than one  year, in  the capacity of      such a pass-holder; and..........". This was not required under 1960 rules and 1965 regulations. Regulation 8  provides that  an applicant shall be permitted to operates as Custom House Agent at the Customs Station for which the  application is  made initially  for the period of

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one year  against temporary licence granted by the Collector in Form B. In view of proviso to the said regulation 8, such applicant is entitled to avail of two chances for qualifying in the  written or  oral  examination  prescribed  in  those regulations. However,  he may  avail of  the third chance in the next  examination to be held in terms of regulation 9 on the conditions  prescribed in  proviso to  regulation 8. The Collector has  empowered to  extend the  aforesaid period sf one year  for which  the temporary licence  had been granted by another  six months  or such further period not exceeding one year  to enable  the applicant  to avail  of  the  third chance for qualifying in the examination. Regulation 9 gives the details  of such  examination which  is to  be conducted twice every  year. A  licensee may,  having  regard  to  the volume of  business transacted  by him in view of regulation 20 ‘employ  one or more persons to assist him in his work as Custom House  Agent’. Such  appointment of  a person  by the licensee is  to be mode only after obtaining the approval of the  Assistant   Collector  of   Customs.  Regulation  20(3) prescribes the  condition subject  to which such persons can be appointed  by the  licensee to  assist him in his work as Custom House  Agent. Regulation  20(3) requires  such person who  has   been  employed   by  the  licensee  to  pass  the examination conducted  by the Assistant Collector of Customs within six  months from  the  date  of  his  appointment  to ascertain  the  adequacy  of  his  knowledge  regarding  the provisions of  the  statutes  subject  to  which  goods  and baggage are cleared through the Customs.      The appellants  challenged the validity of regulation 8 aforesaid saying  that it  has introduced  an arbitrary  and irrational provision  regarding grant  of temporary  licence before an applicant qualifies at the examination to be held. According to  them, 1960 rules and 1965 regulations required the applicant  first to  appear at  the examination and only after such  applicant was  selected, a  licence  was  to  be granted to  him to act as Custom House Agent, but regulation 8 of  1984 regulations enables the applicant, who has not at all appeared  at any  such examination  to act  as a  Custom House Agent  on basis of temporary licence granted to him by the Collector. On basis of such temporary licence he can act as Custom  House Agent  for a period of one year as a matter of course  and upto the period of two years on the condition prescribed by  proviso to  regulation  8  which  is  per  se arbitrary, inasmuch  as a person is allowed to act as Custom House Agent  on  basis  of  temporary  licence  without  his suitability and qualifications being tested which was a must under the  earlier rules and regulations. It was pointed out that the  holders of  such temporary  licences  without  the evaluation of their merit can transact any business relating to entry  or departure of the conveyance or import or export of goods  at the  Customs   Station, at,  par  with  regular licensees  who  have  got  the  licence  after  passing  the examinations  conducted   for  their   selection.  In   this connection reference  was made  to the  Report of  the Study Team on  the Customs Department, submitted in the year 1967. In the  said report in respect of the clearing agency system it was  suggested that  the clearing  agency rules should be tightened to  provide effective  control over  the  clearing agents. For that object strict tests for grant of licence or approval to conduct Custom House business should be held. It also recommended that clearing agents associations should be encouraged to arrange their affairs like a disciplined guild with a code of conduct, fair scales of charges, arrangements for training their staff and regulations regarding employing unqualified or  undesirable persons. It was also pointed out

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that the  aforesaid recommendation, that the clearing agency rules should  be tightened to provide effective control over the agents  had been  accepted by  the Government. Reference was also made to the Report of the committee for Subordinate Legislation,  submitted  in  the  year  1983  in  which  the procedure for  inviting applications for grant of licence to act as  Customs House  Agent, conduct  of a  written or oral examination to  satisfy regarding  the  suitability  of  the applicant was  recommended apart  from  other  requirements. However, it  may be  pointed out  that  the  said  committee itself had felt:           "....the  present  restriction      on  the  number  of  Customs  House      Agents should be done away with and      that the  licences should be thrown      open      to      all      eligible      candidates..... ". The committee also recommended:           "The licence  should be issued      initially for  a period  of 2 years      and performance  of  the  applicant      watched.    The    licence    will,      therefore, be  a temporary  one and      its  conversion  into  a  permanent      licence will  be conditional on the      applicants’  showing   satisfactory      turn over  and a  minimum level  of      efficiency." We are  not able  to appreciate  as to how the Report of the Committee for  Subordinate Legislation  helps the appellants when the  said committee  itself recommended  that temporary licence should ba issued initially for a period of two years and  performance   of  the  applicant  be  watched  and  the conversion of the temporary licence into a permanent licence should   be   conditional   on   the   applicants’   showing satisfactory turn  over and  a minimum  level of efficiency. Regulation 8  of 1984  regulations,  appears  to  have  been framed  on   the  basis   of  the  aforesaid  recommendation regarding grant  of temporary  licence for  a period  of one year which period can be extended upto 2 years on conditions prescribed in  proviso to  regulation 8. If regulation 8 has been framed  on the  pattern suggested  by the Committee for Subordinate Legislation,  we are  unable to appreciate as to how regulation  8 can  be held  to be  invalid, arbitrary or ultra vires.      The learned  counsel, who  appeared for the appellants, could not  point out  that a  regulation in  the  nature  of regulation 8  could not  have been framed in exercise of the power conferred  by sub-section  (2) of  Section 146  of the Customs Act. Sub-section (1) of Section 146 prescribes a bar that no  person shall carry on business as an agent relating to the  entry or  departure of a conveyance or the import or export of  goods at  any customs  station unless such person holds a  licence granted  in this  behalf in accordance with the regulations.  None of  the clauses of sub-section (2) of Section 146  prescribe any restriction on grant of temporary licence. The Committee for Subordinate Legislation aforesaid had  also   recommended  under   the  heading   ‘eligibility conditions’ that  the applicant  must be  atleast a graduate and the  desirable qualification  should be  atleast 3 years experience which  could be  reduced to 6 months in deserving cases. Then it recommended that such applicant should pass a written examination  which shall  be held  annually. It also recommended  that   temporary  licence   should  be   issued initially for  a period  of two years and the performance of

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the applicant  be watched.  The Committee  did not  say that such temporary  licence should  be  issued  only  after  the applicant had passed the written examination, rather it laid emphasis that  a temporary  licence should be converted into a permanent  ’on the  applicants showing  satisfactory  turn over and a minimum level of efficiency’. In this background, it is  difficult to hold that when regulation 8 provides for grant of  temporary licence  for a period of one year before the  applicant   has  qualified   in  the  written  or  oral examination so  prescribed,  it  is  invalid,  arbitrary  or unconstitutional in  any manner.  Regulation  8  has  proper check and  balance in  which the experience of work relating to clearance  of goods  through the  customs as  well as the performance at  the qualifying  written or  oral examination both have  been taken  note  of.  The  amendment  which  was introduced in  clause (a)  of regulation  6 by the aforesaid notification dated  15.11.1991 links  the experience of such applicant acquired  in accordance with the regulation 20. It cannot be said that by postponing the qualifying examination for a period of one year and on fulfilling the conditions of the proviso  to regulation  8 upto  2 years  in  respect  of temporary  licensee,   any  irrational  procedure  has  been prescribed or  adopted. From reading regulations 6, 8 and 20 it is  apparent that  1984 regulations have given due weight to the experience as well as to the merit.      It was  pointed out  that in many countries like United States and  Australia, written  examination for such Customs House Agents  is a  must and that test should be held at the threshold. Even  under regulation  8 a qualifying written or oral test  is a  must for a temporary licensee. Regulation 8 requires the  applicant who has been permitted to operate as Custom House  Agent  to  qualify  at  the  written  or  oral examination prescribed  within the  period of  one year  and under certain specified conditions within a further extended period of one year.      On behalf  of the  appellant, reference was made to the judgment  of   this  Court   in  the  case  of  Chandhrakant Krishnarao Pradhan  vs. The  Collector of  Customs,  Bombay, (1962) 3  SOR 108 and it was pointed out that rule 9 of 1960 rules which provided for examination written or oral or both was upheld  by this  Court. Admittedly, in that case neither there was  any controversy nor could have been in respect of grant of  temporary licence  for a  limited  period  before; qualifying at  the written or oral examination, as there was no such  provision in  those rules.  That judgment  is of no help to  the appellants.  Attention was  also drawn  to  the judgment of  this Court  in the case of D.V.Bakshi vs. Union of India,  (1993) 3  SCC 663  where in  a different  contest regulations 8 and 9 of 1984 regulations had been challenged. A grievance  had been  made that  100 marks for written test and 50 marks for oral test was arbitrary and irrational. The controversy with  which we are concerned was not involved in that case. However, incidentally it may be mentioned that in respect of  grant of  temporary licence  for a period of one year under regulation 8, it was said:           "The importance  of  the  oral      interview lies in the fact that the      examiners have  an  opportunity  to      assess   his   performance   as   a      temporary licence  holder and  also      seek his clarification in regard to      certain matters  which  might  have      come to  their knowledge during the      period he  worked  as  a  temporary      licence  holder.   The  Regulations

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    have,  therefore,   taken  care  to      ensure that he has experience of at      least one  year as an apprentice to      an agent  before he applies for the      grant  of   licence.  In  order  to      assess  his  work  he  is  given  a      temporary   licence    before    he      qualifies    by     clearing    the      prescribed     examination.     The      authorities have the opportunity of      assessing his  knowledge  regarding      the laws  and procedure through the      written  examination.  It  must  be      remembered that the customs station      is a  place of  work. Observance of      regulations is absolutely essential      as movement  of very valuable goods      takes place  and only  sufficiently      experienced hands  can be permitted      to act  as agents.  He must satisfy      the   authorities   that   he   has      adequate  knowledge  regarding  the      laws and  the  procedure  connected      with the  clearance  of  goods  and      that he  actually is  in a position      to handle  the work from the moment      he is  licensed. The  assessment of      his work during the period he holds      the licence is, therefore, of great      relevance and  that can  be done at      the oral  test only. The assessment      has to  be made on the basis of his      performance    as    a    temporary      licenceholder and  his capacity  to      handle goods  as an  agent  at  the      customs station." It can be said that in the aforesaid judgment this Court has impressed the  utility of  the temporary licence for purpose of the  assessment of  the work  of such  temporary  licence holder.      Accordingly, the appeal is dismissed. There shall be no order as to costs.