# ·r1ie Cominiati~ntr oJJn~-tax1 ft! odraa v. S.A.S. JI arim~hu }{ adar

- **Citation:** [1962] 3 S.C.R. 108
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** P. B. Gajendragadkar, K. SunBA RAo, \I. HIDAYAT'CiLLAH, J.C. Sh.Ah, RAGHUBAR DAYAr
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/r1ie-cominiati-ntr-ojjn-tax1-ft-odraa-v-s-a-s-ji-arim-hu-adar-2313
- **Pages:** 30

## Headnote

Cu~tom House .4.gent8-Lictncl-R'fllP,.s governin{l granU
tliere<if-1 alidily-Agent'a liability for •hart collection of cu.lama
dutie.!-Cmtam Hau•<
Agents
licensing
Rule8,
1960,
rr. 4, 6(a), 6(b), 6(c), 8, 9\2) (p), JO (1) (C), 11, 15 (g), J5(k),
12, 17, 19, 22 Form• C. D.-Sea Ouslama Act, 1878 (8 of 1878),
j'·
as amended by Act 21of1955, ss.4, !1,39 (/), 202-Conalilulia•
'
of Jndit1, Aris. 19 (I)(g) 19 (6).
The petitioners were working as Dakils at New Qum>~
•
;•
'
~ S.C.:R.
SUPREME COURT REPORTS
109
H-0use, Bombay, under licences issued under s.202 of the Sea:
Customs Act, 1878. In 1955 by an amending Act, s. 202
was substituted by another section and by sub-s. (I) of s. 202
it was enacted: "no pe1Son shall act as an agent for the .transa:crlon of any business relating to the entrance or clearance of
vessel or the import or export of goods or baggage in any
cuitom house unless such person holds a licence granted in
this behalf
in accordance with the rules made under
sub-section (2)". By sub-s.(2) the Chief Customs-authority was
empowered to make rules for the purpose of carrying out the
provisicJns of the section. Section 4 provided that "when any
person was .... authorised by the owner of the goods to be his
agent in respect of such goods for all or any of the purpose,
of this Act .... such person shall, for such purposes, be deemed
to be the owner of such goods". The petitioners who, after
the enactment of the new s. 202, had to apply for licences to
be .granted in accordance with
the rules framed under
sub-s.(2), challenged the validity of certain of the rules on the
ground that they contravened Arts. 14 and 19 of the Constitution of India and also that they were in excess of the rulemaking power conferred by s.202 (2). In particular, they.
questioned the validity or r. 12 under which inter alia the
agtnt was required to enter into a bond in Form C by which
he was made liable for short collection of customs duty under
s. 39 and also to furnish security which might be increased or
decreased by the Customs-collector.
He/,d : (I) that the rules in question though they were
headed as framed under s. 202 of the Sea Customs Act, 1878,
cannot be impugned on the ground that some of them go
beyond the special purposes of that 'ection and seek to further
some of the general purposes of other parts of the Act, since
the Chief ·custom• authority is also empowered under s. 9 of
the Act to make rules consistent with the Act "generally to
carry out the provisions of the Act."
(2) that rr. 4 and 8 under which the Customs-collector
could limit the number of licences to be granted at the Customs
House and applications could only be made if the Customscollector published
a notice inviting applications,
do not
contravene
Art. 19 of the Constitution, as they are only
derigned to advance public iriterest.
(3) that rr. 6(a) and 6(b) which require the applicant to furnish to the Customs-collector satisfactory evidence
as to his respectability, reliability and financial status and
that· he would be in a position to muster sufficient clientele
Chandra!.:ant
Kriahnarao
Pradha-n
v.
The Collector oj
Customs, Bomba•,
1961
Chottdraka11t
Kri1hnarao
Pradhan
v.
·rM Colltdor of
Ct.taloml, Bombay
ilo
St.Jt>REME COURT REPOR'l'S
and business in the event of his being granted the li('Cl).cell,
are reasonable rcstric1ions wi1hin the meaning of Art, 1!1(6}
and are valid.
(4) that cl. (p) of r. 9(2) which requires \he Iic~n$1!e
to have a working knowledge of the procedure in the matter
of refund of clainos, appeals and revision petitions \lndet.the
Sea Customs Act, is valid, since it is nece.sary where an ·agent
handles goods of the principal.
(5) that r. IO (l)(c) which gives the Customs-collector
a wide discretion lo reject an application for the grant of ii
licence, if he considers the applicant to be not suitable, i~
an unreasonable restriction upon the right of the successfu I
randidate to carry on his avocation, and is invalid.
If a
candidate is found fit u

## Text

_Characters 0–39,902 of 62,634. This is a partial read: ask again with offset=39902 for what follows._

1901
·r1ie Cominiati~ntr
oJJn~-tax1
ft! odraa
v.
S.A.S.
JI arim~hu }{ adar
/{ idayatu l l ah J.
1961
A ugu1t JI.
108
SUPREME COURT REPORTS
[1962]
daily in onli.nary Jifo.
There is also equity (if
equitable considerat.ions can be taken into aocount
in a taxing Act) in giving earned income relief to
a person who has to pay tax on income whioh
belongs to another but which he has himself earned.
In our opinion, the section can only be read u
enacting that for purposes of earned income relief,
"such income" will be included which, though it is
the income of another person, has been earned by
the assessee, or, in the case of a firm, whore the
u.ssessee is a partner, by his being actively engaged
as part.ncr in the conduct of the business. The
wordH "where the assessee is a partner" must be
giv<'n dft>ct to, even when the income of the minor
or the wife is considered under the latter part, and
they also point to the same conclusion. In reading
the definition in this way, no violence is done to
the language of it. The condition that tho
asscssee must have worked actively as a partner
is thns applicable also to tho latter part of tho
rlefinition. In our opinion, the High Court waa
right in the answer which it gave.
The appeals foil, and are dismissed with costs.
Appeals di8missed.
CHA'NDRAKA.J.'{T KRISHNARAO PRADHAN
AND ANOTHER
v.
THE COLLECTOR OF CUSTOMS, BOMBAY
AND OTHERS
(P. B. GAJENDRAGADKAR, K. SunBA RAo,
:\I. HIDAYAT'CiLLAH, J.C. SH.AH and
RAGHUBAR DAYAr,, JJ.)
Cu~tom House .4.gent8-Lictncl-R'fllP,.s governin{l granU
tliere<if-1 alidily-Agent'a liability for •hart collection of cu.lama
dutie.!-Cmtam Hau•<
Agents
licensing
Rule8,
1960,
rr. 4, 6(a), 6(b), 6(c), 8, 9\2) (p), JO (1) (C), 11, 15 (g), J5(k),
12, 17, 19, 22 Form• C. D.-Sea Ouslama Act, 1878 (8 of 1878),
j'·
as amended by Act 21of1955, ss.4, !1,39 (/), 202-Conalilulia•
'
of Jndit1, Aris. 19 (I)(g) 19 (6).
The petitioners were working as Dakils at New Qum>~
•
;•
'
~ S.C.:R.
SUPREME COURT REPORTS
109
H-0use, Bombay, under licences issued under s.202 of the Sea:
Customs Act, 1878. In 1955 by an amending Act, s. 202
was substituted by another section and by sub-s. (I) of s. 202
it was enacted: "no pe1Son shall act as an agent for the .transa:crlon of any business relating to the entrance or clearance of
vessel or the import or export of goods or baggage in any
cuitom house unless such person holds a licence granted in
this behalf
in accordance with the rules made under
sub-section (2)". By sub-s.(2) the Chief Customs-authority was
empowered to make rules for the purpose of carrying out the
provisicJns of the section. Section 4 provided that "when any
person was .... authorised by the owner of the goods to be his
agent in respect of such goods for all or any of the purpose,
of this Act .... such person shall, for such purposes, be deemed
to be the owner of such goods". The petitioners who, after
the enactment of the new s. 202, had to apply for licences to
be .granted in accordance with
the rules framed under
sub-s.(2), challenged the validity of certain of the rules on the
ground that they contravened Arts. 14 and 19 of the Constitution of India and also that they were in excess of the rulemaking power conferred by s.202 (2). In particular, they.
questioned the validity or r. 12 under which inter alia the
agtnt was required to enter into a bond in Form C by which
he was made liable for short collection of customs duty under
s. 39 and also to furnish security which might be increased or
decreased by the Customs-collector.
He/,d : (I) that the rules in question though they were
headed as framed under s. 202 of the Sea Customs Act, 1878,
cannot be impugned on the ground that some of them go
beyond the special purposes of that 'ection and seek to further
some of the general purposes of other parts of the Act, since
the Chief ·custom• authority is also empowered under s. 9 of
the Act to make rules consistent with the Act "generally to
carry out the provisions of the Act."
(2) that rr. 4 and 8 under which the Customs-collector
could limit the number of licences to be granted at the Customs
House and applications could only be made if the Customscollector published
a notice inviting applications,
do not
contravene
Art. 19 of the Constitution, as they are only
derigned to advance public iriterest.
(3) that rr. 6(a) and 6(b) which require the applicant to furnish to the Customs-collector satisfactory evidence
as to his respectability, reliability and financial status and
that· he would be in a position to muster sufficient clientele
Chandra!.:ant
Kriahnarao
Pradha-n
v.
The Collector oj
Customs, Bomba•,
1961
Chottdraka11t
Kri1hnarao
Pradhan
v.
·rM Colltdor of
Ct.taloml, Bombay
ilo
St.Jt>REME COURT REPOR'l'S
and business in the event of his being granted the li('Cl).cell,
are reasonable rcstric1ions wi1hin the meaning of Art, 1!1(6}
and are valid.
(4) that cl. (p) of r. 9(2) which requires \he Iic~n$1!e
to have a working knowledge of the procedure in the matter
of refund of clainos, appeals and revision petitions \lndet.the
Sea Customs Act, is valid, since it is nece.sary where an ·agent
handles goods of the principal.
(5) that r. IO (l)(c) which gives the Customs-collector
a wide discretion lo reject an application for the grant of ii
licence, if he considers the applicant to be not suitable, i~
an unreasonable restriction upon the right of the successfu I
randidate to carry on his avocation, and is invalid.
If a
candidate is found fit under the other rules and has ·succe.ifully
passed
the examination, he should only be rejected
under
a rule which requires the Customs-collector to state
his reasons for the rejection, and the rules must provide for
an appeal against the order.
(6} that r. 11, in so far as it prescribes a renewal fee 9f
Rs. 50, is invalid inasmuch as it has thereby provided not
for a fee but for a tax to raise revenue.
It would be open
to the Government to frame a rule in which the renewal .
fee to be charged is reasonable in the circumstances.
(7) that rr. 15(g}.
15(k), 17 and 19, are designed to
have a control over agents, including firms which act as
agents, who stand in a fiduciary capacity both in regard to
their own clients and the Government, and arc valid.
. .
(8) that r. 22 which enables the Customs-collector to
cancel a licence for non-compliance by the agent with the
other rules or for misconduct on the part of the agent, wh,ich
in the opinion of the Customs-collector, renders him unlit' Jo
transact business in the Custom House, is within the rulcmak.ing power of the Customs-authorities and is valid.
(9) that the words "the person cha.rgcable with
the
duty or charge" ins. 39(1) of the Act are wide enough .In
their ambit to take in, not only the
real owner but .
also a "deemed owner" 'vithin the meaning of s.4 of. the
Act.
(10) that on ils true construction of s.39(1) lt is onlythe goods of the defaulting owner in respect of which the '
agent is also the deemed owner that would
suffer" the·
penalty of detention, but not the goods of a different owner,
t
3S.d.R.
SUPRiElME COURT REPORTS
111
evm though the agent may be authorised to deal on his
behalf.
(11) that r. 12 ;ead with Form C which makes an agent
liable for short collection of customs duties under. s. 39, is
valid and the rule is not invalid on the ground that it enables
the Customs-authorities to make a proper adjustment of the
security to be obtained from each individual agent commensurate with the volume and type of business which he might
transact.
Held, further (Subba Rao, J. dissenting,) that r. 6(c),
which requires the . applicant to produce an income-tax
clearance certificate, is connected with the enquiry into his
respectability and financial status to find out if he can be
trusted with other persons' money and goods, and is valid.
K. Raman and Go. v. State of Madras, A. I. R. 19.'i3
Mad. 84, distinguished.
Per Subba Rao, ].-Non-production of an income-tax
clearance certificate is not germane to the issue of a licence
under the Custom
H~use Agents Licensing Rules, 1960, and·
the principle in K. Raman and Go. v. Siate of Madras, A. LR.
· 1953 Mad. 84, is applicable. Accordingly, r. 6(c) constitutes
an unreasonable restriction on the right of an applicant to
do business as Custom-house agent, and is invalid.
ORIGINAL JURISDICTION: Petitions Nos. 80, 80A.
81 and 116 to 213 of 1960.
Petitions under Art. 32 of the Constitution
of India for enforcement of Fundamental Rights.
S. V. Gupta, M. G. Bhandare, S. N. Andley,
Rameshwar Nath
and P.
L.
Vohra,
for the
petitioners. ·
H. N. Sanyal, Additional Solicitor-General of
India, D. N. Mukherjee and P. D. Menon, for the
respondents.
•
.
Porus A. illehta, J. R. Gagrat, and G. GopalaL krishnan, for the. interveners.
1961.
August
11.
The
jud!IDlent
of
Gajendragadkar, Hid~yatullah, Shah and Raghubar
Dayal, JJ., was ~ehvered by Hidayatullah, J ..
Subba Rao, J., delivered a separate judgmflrlt.
1961
Ghandrakant
K rishnO,Ciro
Pra.dhqri
v.
. "The Collutor <;>f.
Cust'?m.s, B.o.'o/'~Y
1961
or.andrakanJ
Kriahnarrio
Pradhan
v.
The Coll<otor of
Ctuk>m8, Bombay
Hidayatullah J.
iiz
stJPREME COURT REPoRts
(19~2j
IIIDAYAT"C"LLAH, .T.-These
writ
petitions
raise identical questions, and a common argument
was addressed to the Court in all of them. Petitions Nos. 80 and 80A of 1960 have been fikd bj•.
two petitioners. One petitioner holdg a 'permanent'
licence and the other, a 'temporary' licence renew-.
able trienially, to work as Dr£lals at New Customs
Houso, Bombay.
In the other petitions also,
petitioners N'os. I to f>O hold permanent licences,
and petitioners Nos. 51 to 99 hold temporary but·
r<>newable licences. Some of tho permanent licericea.
were issued in I !l36, and some of the temporary
licences were issued as far back as l!l44. These
licences, whether permanent or temporary,· were
issued under s.202 of the Sea Customs Act, 1878, prior
to its amendment by the Sea Customs (Amendment)
Act, 195f> (Act 21 of l!l55).
They were issued
after a brief enquiry and subject to the fulfilment
by tile applicant of the following conditions :
"(l) He must produce at least 2 certificates of character each from a Justice of
Peace or other persons of known respectability.
(2) He must certify that he has not been
convicted of any criminal offence.
(3) He must declare that he will have
no claim to any accommodation
in the
Custom House.
. ' ·
( 4) He must also give ii"· security or'
Rs. 2000 in cash or Govern,ment paper having
an equivalent market value and execute a
Bond for Rs. 2000 on A. fifteen rupees Stamp
Paper in the attached form."
In 195f>, by the amending Act, s.202 wae
substituted by another section. The section now
reads:
"202. ( 1) With effect from such date
__..
as the Central Government may, by notifica·
Iii'
tion in the Official Gazette specify, no persbn
shall act as an agent for the transaction of
&ny buaine&B relating to the entrance 01·
-
•
~
-
SUPREME dOURT REPORTS
113
}
3 S.C.J}.
clearance of any vessel or the import or
export of goods or baggage in any Customhouse unless such person holds a
licence
granted in this behalf in accordance with the
rules made under sub-section (2).
)
'"
(2} The Chief Customs-authority may
make rules for the purpose of carrying on t
the provisions of this section and in particular such rules may provide for-
(a) the authority by which a licence
may be granted under this section and
the period of validity of any such licence;
(b) the form of the licence and the
fees payable therefor ;
( c) the qualifications of
persons
who may apply for a licence ;
( d) the restrictions and conditions
(including the furnishing of a security
by the licencee) for his faithful behaviour
as regards the custom-house regulations
and officers) subject to which a licence
may be granted;
( e) the circumstances
in which a
licence may be suspended or revoked ;
and
(f) the appeals, if any, against an
order of suspension or revocation of a
licence, and the period within which such
appeals shall be filed."
As a result of the enactment of this section,
the original licence, whether permanent or temporary, would have become ineffective after the
date to be specified by the Central Government.
It became necessary for the petitioners and others
.. to apply for licences granted in accordance with
the rules framed under sub-s. 12).
These rules
were framed, and public notices were issued in.viting applications ; but the dates were postponed
1961
Ghandrakant
Krishnarao
Pradhan
v.
Tiw Collector of
Customs, Bom~ay
Hidayatullon J.
-
1961
Chandrakan>
}i·rishnar(J/)
PradW.
v.
Tht CcU ecl(l'f of
cii.,tcma, Bombay
Hidayalullah J.
1i4
SuPRE~JE cotJiiT REPORTS
[1962J
till the rules were published in the Gazett-0 on
llfay 14, HJ60.
It is not ncecssary to refet to tl.Je
prior history of thl'se rules and to the many
representations that were made, as they are not
relevant. On June 18, 1960, a public notice (No. Si)
was issued fixing June 25, 1900 as the last date
for making applications for the new licences, and
the persons affected were informed that the operation of the new licences under the rules would
commence on ,July 14, 1960. On .rune 27, 1960,
Writ Petitions NoB. 80 and 80A of 1900 were
filed, followed by Writ Petitions Nos. 81 and 116
to 213 of 1960 filed on July l:l, 196(1, An ex·parte ad
interim stay oft ho revocation of the existing licences
was obtained from this Court, and subsequently,
the respondentli undertook to issue to the pctitiqnen; special temporary licences renewable yearly
till the disposal of these petitions.
Prior to the Custom House Agents Licensing
Rules, 1960, there were four classeR of Agel\ts.
They were (l) Clearing Agents, (2) Dalals, (3) Muc·
cadams and (4) Baggage Clearing Agenta. According to the petitioners, there wore
100 licensed
Clearing Agents, 200 licensed Dalals, 270 Muccadams and about 15 Baggage Clearing Agenta.
Tho duties and functions of these four classes of
agents were different.
Whether th~s'" distinctions
\\'Cf<' always maint;iined and whether they grew
out of r<'gnlations or usage iR hardly nccess:iry to
cnquii·<'. By the Rules of I !)()0, these cl~sees wcro
merged into one, and all licensed agents were
placed on an Pqual footing.
fo other
words,
there is t.o be hereafter ono l']aHH of agents.
Though the petitioners holding 'permanent.'
licences and the petitioners holding 'temporary'
licences with a term to run out ha>e relied upon
the fact th11t their licences arc still valid, there was 4
no serious attempt to deny that under s. 202(1) they
\l·oul<l be rendered ineffective after the date to be
fixed by Go,·ernmcnt.
The 'perrnaiwnt' licencll8
-
3 S.C.R.
SUPREME COURT REPOR'IS
115
also are not in a favourable position in this regard.
If the first sub-section requires that fresh licences
to work as Custom House Agents be obtained, the
distinction between permanent and temporary
licences ceases to be material. No part of s.202
was challenged as being void or ultra vires. In
these petitions, only the Rules are challenged as
in breach of the fundamental rights under Arts. 14
and 19 of the Constitu ;ion and also as being in
excess. of the rule-ma dng power conferred by
s.ub-s. (2) of s. 202. Ft rm 'C' prescribed under the
Rules for taking security from the approved agents
is also questioned as being in excess of the power
to make rules and contrary, in certain respects, to
the Sea Customs Act itself. It may be mentioned
that the petitioners in all the Writ Petitions are
Dalals; but at the hearing, certain Clearing Agents
obtained permission to intervene, and were also
heard.
Since the Sea Customs Act, in general and
s. 202, in particular were not challenged in the
petitions, we must start with the premise that
the authority to insist on fresh licences under the
Rules in the case of all the operators was properly
exercised. The first question to consider is whether
the Rules, speaking generally, were validly framed
and the next question to consider is whether any
of the Rules individually challenged, goes beyond
the Se'l Customs .Act, or offends against the Constitution.
In questioning the Rules generally, the
petitioners submit that these Rules could only be
framed for the purpose of carrying out the purposes
of s.202 [vide sub-s. (1) ], or to provide for the
matters mentioned in els. (a) to (f) of s. 202(2).
Some of the Rules. it is submitted, go beyond
the general purpose of the section, which is to
license agents and the special topics mentioned
there, and seek to further some of the purposes of
other parts of the Act. Mention in this connection
1961
GhmidrDJtan·t~
KrUhnar4D
Pf'ad-han
v.
Th~ Collector of
CUatom1, Bombay
HidaJalu!la1' J.
.
11161
Chandrakant
Kria""4rao
Pradlwr
v.
1 ftt Cotltcior of
(.\ulc""', /Jombay
llidayatttllah J.
ii6
SUPREME COURT REi>ORTs
[1962J
is made specially of Form 'C' prescribed by the
Hules, under which the r.gents personally a.nd the
~ecurity furnished by them have been made li:i.blo
for sh0rt collection of Customs duty, etc. Tho
question whether the agents arn liable, in any
l'vent, for such short collert.ion under s, 39 is a
question, which will ha\·e to be examined on
merits separately, but for repelling the argument
in its present from, it is sufficient to say that it is
robbed of all its force bys. 9 of the Sea Customs
Act.
l' nder s. 202(2), the Chief Customs-authority
is empowered to mako rules for the purposes of
that section.
That purpose is the licensing of
agents and the regnlation of their conduct and
functions.
But the Chief Customs-authority is also
empowered by s. 9 to make rules consiEtent with
the Sea Customs Act "grnicrally to carry out jhe
provisions of this Act".
The power to make rules
under s. 202 is not the only power which the Chief
Customs-authority can exercise, and it is only too
clear that power can also be deri,·cd from s. 9,
if
there be need.
Thus, if it is necessary that tho
agents must carry out certain provisions of the Aet,
a rule <"an bo made in the exercise of the two
powers together. Though the impugned Rules ar'l
headed as framer! under s.202 of the Sea Customs
Act, they cannot be questioned, if they carry out
11ot only the special purposl's of s.20:! but also
ecrt.ain other purposes of the Act, because the two
powers will concur to sustain them. It is only
when a rule or rules arc pointed out, which sub.
Herve neither the spccia,J purpose of the section nor
the general purposes of the Act that they can be
succcssfu lly questionl'd.
In short, therefore, the
petitioners' case on the individual Rules alone
remains to consider.
The first cont€ntion is that uncler the impugn,
er! Rules, the- number of lic<'nces to be granted at
the Customs House can be limited bv the Customscollector, and .that applications can °only be .made,
if the Customs-collector publishes a notice inviting'
(-
r
·'
- ')
-
•
)
3 S.C.R.
SUPREME COURT REPORTS
117
applications. ·This restriction, it is contended, is
unconstitutional, :Ls it interferes with the right of
all the petitioners to carry on their profession or
a vocation freely as contemplated by Art. 19.
The
Rules ber1ring upon these mattern are rr.4 and
8, The latter -Rule says that the number of licences
to be granted would be fixed by the Customscollector, havin~ regard to the volume of import and
export business transacted through the Customs
House, and the number is capable of being revised
from time to time. The former empowers the
Customs-collector to invite applications, as and
when he considers it necessary. It cannot be said
that the Rules are not designed to advance public
interest, because even a professions or trade has
sometimes to be limited in the public interest,
Wben we pointed out to Mr. Gupte that this kind
of limitation on the number of persons allowed to
hold licences ie common, as, for example, porters
in a railway station, taxicab drivers and so on, he
stated that at least during the transitional period,
the old 0perators might have been given licences
on production of proof that th.ey held licences
previously.
The argument is really not one based
upon the interests of the public but upon the
interests of the present holders of the licences.
Public interests in the context must override
private interests. It cannot be said that all the
present operators are equally desirable, and if
their number exceeds the requirement of the
·Customs House, it is obvious that some retrenchment in their numbers may legitimately be made.
Every one has an equal chance of applying for the
existing vacancies, but he must stand in competition with the others.
There is no limitation on
the number of applications that can be made, and
thus, every operator will get a ehance to have his
case examined. It is to be expected that the most
experienced and the most efficient will get preference,. and no claim can be made on behalf of the
~noom:p-etent a,qq tqe inefficient that the;v should
> 1961
· Chandrakant
· KriBhnarao
Pradhan
. v.
.
The Collector of
Ousto1ns, Bombay
Hidayatullah J.
19GJ
Cluwi rol;ont
It r Wui.orao
Pradhan
v.
n., C./lt<lor of
Cu.•toms, Bombay
Hidayatullah .I.
118
SUPREME COURT REPORTS
[1962]
receive equal treatment. Once the number is
limit€d to the requirements of the business, it is
manifest that the Customs-collector will invite
applications onl_v, as and when occasion demands.
These Rules, in our opinion, cmmot be said t6
offend against the Constitution.
The next contention is about rr.6(a), (b)
and (c), which require the applicant to furnish to the
Customs-collector satisfactory evidence as to J:iis
respectability, reliability and financial status, and
that he would be in a position to muster sufficient
clientcle and business in the event of his being gran.
ted the licence. The applicant has also to furnish an
inconw-tA.x clearance c<:rtificate. These conditions
are challenged as being unreasonable restrictions
upon the right to carry on a profession or avocation. Serious attempt was not made to establish
that the condition about respectability and reliability was unconstitutional. It was, however, pointed out that evidence about financial status created
11 class barrier between the rich and the poor and
only the rich were to be preferred. Ry the words
"financial status'' is not meant that the applicant
must be n wealthy person; what is required is that
he should not be financially embarrassed, and proof
that he is in easy circumstances. It is obvious
that the agents under the Act deal with vast sums
of money and valuable articles, and it may be
necessary to scrutinise the financia I position of the
applicant to find out whether or not he would be
exposed to temptations. A person heavily indebted
or insolvent cannot be trusted in the same way as a
person who is not so emba1Tassed, and an enquiry
into financial status is so much in the public
interest, that we cannot say that the condition
must 11Pcessarily be unreasonable. Similarly, the
A.rgument that new entrants would find it difficult
to assure that they would have sufficient clicntele
and business and would thus be discriminated
against, is not correct. The Customs House i& not
a place where persons Gan be allowed to learn a
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3S.C.R.
SUPREME COURT REPORTS
Ill)
profession or to take a chance.
The movement of
goods, the due performance, of the duties and functions under the Sea Customs Act and ohsorvance of
the regulations are not easy matters for a person,
who is not sufficiently experienced and who has not
got the backing of a certain amount of business
and the experience which such business affords.
It may be necessary for a person to apprentice
himself for some time to get to know the importers
and exporters, and to prove to the Customsauthority that by reason of his apprenticeship
and his business connections he would be in a
position to handle the work in the Custqms House
from the moment he is
licensed. The Rule is
designed to avoid entry into the Customs House
premises of persons who, being there, arc unable
to do business, and merely add to the number of
persons present.
'fhe last condition is the production of an
income-tax clearance certificate.
The petitioners
rely upon a decision of the Madras High Court
reported in K. Raman and Co. v. Stale of Mcidras (1).
In that case, it was held that the fact that a pers011
was in arrears of income-tax was not germane to
the issue of a licence under the Yarn Dealers
Control Ordor, and that the insistence on the production of an income-tax clearance certificate was
extraneous to the carrying on of the business.
The position of an agent who handles other persons'
moneys and goods is different from that of a dealer
who deals with goods on his own behalf. As part
of an enquiry into an applicant's respectability,
reliability and financial status, an enquiry can also
be made to see whether he has discharged his
debts to the State. If a person is liable to incometax and pays it punctually, he would have no difficulty in proving it. If, however, for some good
reason the payment has been delayed, there would
be nothing to prevent him from proving it. The
(1) A.I.R. 1953 Mad. SA.
19U
ChlJJIJl.rakant
Kf'ishnarao
Pradhan
.,
The Collector of
Ct1.stoma, Bombay
Hida)'atullah J.
1911
CIUwiralcan t
Xr/1/mtlrao
Pradhan
v.
-Tht Collector of
.Cuat~.t, Rombay
W•layalullah J.
120
SUPREME OOURT REPORTS
[1962)
insistpnce upon the production of the certifioate is,
· -
in our opinion, connected wit.Ji the enquiry into his (.
respectability and financial status to find out if
he can
be
trusted with other persons' money
and goods.
The next Ruic which is questioned is r, 9,
which provides for an cxaminntion of the applicant.
This cx:aminntion follows a scrutiny of tho appJi.
cation under the otht>r Rules, and embraces questions
on various subjects. The duties of the agents
requirn them to Jurncllc goods, and the examination
is designed to find out whether a c:inrlidatc knows
the cfemcnts of th" law relating to the arrival,
entry and clearance of \'essels and goods. Objection
is not raised to the cx:imination as a whole hut
only to cl. (p) of r. !l (~) under which a c~ndidat-0
is supposed to know the proc<>dure in the matter
of r!'fund of claims, :ippeals and revision petitions
under the Soa Customs Act. It is contended that
these arc matt.NS in which nn agent is not interested
as an agent, but arc matters for the owner and the
Customs-authorities to know. It is true that the
curriculum for tho examination is somewhat extensive ; hut it is also elear that what is expected
of the candidate is knowledge, not necessarily
exhaustive but sufficient, of the laws relating to
the arrival, ontry and cloarancc of vessels and
!!oods.
\Vo do not think that it is wrong for tho
;\uthorities to insist upon at least a working knowll'dgc of the laws applicable to the kind of work
the a(7ents arc reqairctl to do. When licences are
issued under other laws, a candidate is sometimes
required to answm· questions relating to the law
under which the ]iPcncc is issued. One well-known
example is the questioning of a candidate about
the rul"s of the road when ho is issued a licence
to drive a 1ncchanieally-propellcd vehicle. Those
Hules advance efficiency, and the additional knowledge about refunds, appeals and revisions under
the Act mav Le necessary where an agent handles
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3S.C.R.
SUPREME COURT REPORTS
121
goods of a principal, who is himself not present to
file appeals or revisions or to claim refunds.
Tbe
Rule, in our opinion, is perfectly valid.
Rule 10 is the next subject of attack. It provides that the Customs-collector shall reject an
application for the grant of a licence (a) if the
candidate fails to pass the examination, or (b) the
number of vacancies do not justify the grant of
such licence, or ( c) the applicant is not otherwise
considered suitable. Objection is taken to cl. ( c).
It is said to confer a very wide discretion on the
Customs-collector, and reference is made to sub-r.(2),
in which it is provided that no appeal shall lie
from the or<ler of the Customs-collector rejecting
an application. It is further pointed out that in
July, 1960, the Rules were amended by the addition
of r. 25, under which an appeal is to lie to the
Chief Customs-authority against every order of the
Customs-collector-(i) rejecting an application for
the renewal of a licence granted under these Rules;
(ii) rejecting a fresh application made in accordance
-with r. 17; and (iii) refusing the gran~ or renewal
of a special temporary licence under r. 24. It is
argued that even though an appeal has been provided for these matters, no appeal has been provided for the rejection under r. lO(l)(c). No doubt,
other reasons may exist for rejecting the application
of a candidate, as for example, when he is found to
be a leper or an epileptic ; but one would expect
that an order of this kind would be backed bv
reasons to be recorded in writing. It must be
remembered that there is first a scrutiny of the
application and an enquiry into the respectability,
reliability and financial status of the candidate.
Then follows an examination. If a candidate
satisfies all the above conditions, there would
hardly be any ground left for rejecting his appli-
&ation, except probably his physical,unfitness tq
do the work.
The Rule which is framed is so
general tqat it )e~ves t9 the discretjoli Qf the
=--
Clmd~atant
IJ(ri,tAmzrcw
•·Pradhan
~
·. v." .
·T1ie Col.l!Clor of
'buato}hs;•"!ll""'bay
li>aoyaf'ii11an' J.
. 19'1
C~t
/(',..,.,... ..
Pro4"""
••
77w C.U•clo• of
°""""'• Bombay
H;day ... llah .T.
122
SUPREME COURT REPORTS
[1962]
Custom8·collector to reject :>. candidate for a trumpery rca.~on (which he need not state), even though
the candidate may IH' othrrwisc suitnhlP. In our
opinion, if a candidate i~ found fit undPr tlw other
Itnlcs and h:y; succcgsfnlly passer] the examination,
he should only he rejected umler a rule which
requires the Customs.collector to state his reasons
for the rejection, and the rules must provide for an
appeal against that ordrr, as they do in the other
casrs.
As the Ruic stands, it cannot be considered
to he a reasonahle restriction upon the right of th<>
successful can<lidatc to carry on his avocation.
'!'he next Ruic which is <(Hestioncd is r. I l,
which enjoins the payment of a fre of Rs. iiO both for
a fresh application as well as renewal of the licence.
In so for as the fee for t.he grant of a licence in the
first instance is concerned, it cannot be said that
the charge is exorbitant. It is not disputed that a
fo<· is an amount collected to reimburse the Government for the expenses of licensing.
It must
reasonably be meaAnre<l against the cost which
may be entailed in the proccs.~ of granting licences.
rn the initial stage .. the CuAtoms·authorities have
to scrutinise applirations, subject the candidates to
an examination, and provide them with liccnceR to
carry on thl'il' work. A fee of Rs. fiO initi:illy may
not be considered unreasonable, regard being had to
the Aerl'ices involved. The same, however, cannot be
said in the case of renewals. It is pointed out in
the petition that formerly the charge was only
50 nP. It is averred in the petition that all that the
licensing authority does. iA t,o mnke an endorsement on the licence that it is renewed for a further
period. It has been ruled in this Court that under
the guise of a foe there must not be an attempt to
raise revenue for the general funds of the State.
In our opinion, a renewa 1 foe of Rs. !iO does not
entail services which can be reasonably said to
measure against the charge. It may be pointed out
that, though this avenuent was Illade in the petition,
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3S.C.R.
SUPREME COURT REPORTS
123
no attempt was made by the answering respondents
to traverse it. In our judgment the renewal fee
of Rs. 50 ceasr.H to he a fee, anrl is, in its nature, a
tax to raise revenue. Such :m impost cannot be
justified as a fee, and we. accordingly, hold that
this charge is improper. It would, however, be
open to the Government to frame a rule in which
the renewal fee to be charged is reasonable in the
circumstances.
The next objection is to sub-r.(g) and sub-r.(k)
of Rs. 15. Sub-rule (g) requires a Custom House
_ Agent to pay over to Government all sums received
for payment and to account to his client for monies
in his hands. Sub-rule (k) requires him to maintain
accounts in such form and manner as may be
directed from time to time by the Customs-collector,
·and submit them for inspection to the Customscollector or an officer authorised by him. No exception can be taken to snb-r.(g), which only states what
must be regarded as an inevitable obligation on
the part of the agent. Sub-rule (k) is said to be
excessive control on t.he part of the Customs-al1tho.
rities of the way in which the agent may keep his
own account. The licensing of an agent creates
an assurance in the minds of the prospective
clients, and the Rule is designed to ensure that the
monies which the agents handle are properly
accounted for.
In our. opinion, these Rules are
salutary, and further the control over the agents,
who stand in a fiduciary capacity both in regard
to their own clients and the Government.
Rule, 17, which enjoins upon a firm which acts
as a licensee to report to the Customs collector as
early as possible and, in any event, within a period
of three days of a change in the constitution of the
firm, is next challenged. It is said that the periorl
of three days is too short ; but it must be rernern.
bered that a large number of transactions may go
through without. the licensing authority being awar1 ·
that the constitution of a firm has changed. Thn
~ule i~ des~ned tQ
brin~ promptly to the notice
1961
Chandrak""t
Krishnaroo
I'radhan
v.
The C•llector of
CuBtom8, Bombay
Hiiayatullah J,
-·
1961
chandralehnt
Kri1hnarao
Pradhan
·v.
Tht Colltetor of
•
0
Cu•foirt•~ B()flfbay
· ft;J;;;i~iah J.
124
SUPREME COURT REPORTS
[1962]
of the Customs-collector the change in the constitution of the firm, so that lw may bl: in a position
to decide for himself whether the licence in the
changed circumstances should be allowed to operate
or hc suspended or revoked. In our judgment,
this Rule cannot he questioned.
:\Ir. Porus .Mehta who argued the case on
hclrnlf of the Clearing Agents, stated that the newly
constitutecl firm is required to make a fresh appli·
cation which is to be dealt with in accordance with
the
provisions of rr. 6 to 13.
According to
him, every change in tho constitution of the firm
requirPs tho firm to go throup-h the ent.ire process
of scrntinv and examination, which he t-0rms
unnecessary. The rule is designed to ensure that the
new members of firm answer the requirements which
have been laid down is Rules G to 13, and these
requirements may be necessary, if new entrants come
in. It is to be noticed that pending the disposal of the
application, the Customs-collector is authorised by
the rule in hia dis<lrction to allow the existing firm
to carry on the business of Custom Hous<' Agents.
This softens the rigour of the rule, because the
work of the agents in proper casPs wonlcl not be
hampered, and the application would stand -01'er
for dispoMI to a later date.
Rule 19 which also enjoins the maintenance
nncl inspection of accounts by a firm was critiCised
in th<' samo manner as was
r. 15, and for the
reasons which we have given, we hold it to be
eorulucive to the proper control of the financial
activities of a firm as licensee.
Rule 22 den la with the ca11ePllation of the
1 icencc for failure of the agent to c·omply with any
eonditions of the bond executed \,y him unclcr the
Rules, for failure to comply with ~n~· of the prov-i·
sions of the Rules and for misconduct on his part
which, in the opinion of the Customs-collect-Or,
render~ him llllfit to trnnllllct J!\l~jness in ·ti\~
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:j S.C.R. StJPnEMl!.: COURT REPORTS
125
. _,
Customs House. It is contended that the rules
are so exhaustive and numerous that no agent
would ever be able to keep out, of the operation
of that Rule, and that he would be perpetually
exposed to the penalty of suspension or rcvoc'.1tion
of his licence.
Ru !es arc made for comphanro
and not for breach, and even though striet, they are
all designed to ensure efficient and proper working
on the part of tho agents. A rulP insisting upon
-
such compli1tncie with the other rules on pain of
penalty cannot ·he said to be outside the rulemaking power of the Customs-authorities. Every
order of suspension or revocation is subject to
appeal, and there is thus room for interference if
the Customs-collector acts arbitrarily or perversely.
In our opinion, with the existence of an appeal,
the rigour of the rule, if any, is taken away except
in those flagrant cases, where suspension or revocation. of the licence would be merited.
Lastly, it is contended that the Rules control
a licensed agent in a manner which makes him an
J 'unpaid servant' of the Customs-authorities. This
is one way of looking at tho m>1tter.
The right
way to look at it is that a profession is being regulated, and the prof, ssion is one in which an agent
-
deals with the property of another and by the law
is deemed to be owner of the property. A person
-
in such a high fiduciary position must, of necessity,
be subjected to strict control, and the licensing
authority in holding him forth to the prospective
principals as a reliable and trustworthy person
must see that persons acting on the faith of the
assurance of the licence are in no way damnified.
The Rules, therefore, subserve a very s<ilutary and
necessary prin'cipk, ;.nd, in our judgment,, are
designed to advance public interest and cannot be
~ questioned, unless a person wishes to act dishonestly and wants to avoid control. It is wellknown that many underhand practices are common
at Customs Houses, and the Customs-authorities
1961
Chandrakatit
Krtalinarao
Pradhan,
v.
'l'he OoU"tor of
Cu~toms,. Bombay
Hirla'fjatullaft J.
Cha•drakard
1\riehltarao
Pradhan
Y.
TJo, ColluiM of
CUlro,..,B~
RidayaluUah J.
126
SUPREME COURT REPORTS
[1962]
have tu b<' vigilant in
preventing them. They
must, therefore, seP that thev do not license the
wrong type of persons; and in the interests of the
Revonue and more so, in the interests of persons
who employ licensetl agents, these Rules have been
framed.
Looking at the Rules generally, we are
of opinion that though they a.re strict, they are
absolutely necessary, and their strictness would
he felt only by persons, who a.re not otherwise
honest.
The ma.in ar~ument in the case is upon r. 12
read with From 'C , which is tho bond which every
applicant has to cxecu:e in favour of the PreRident
"f India, anri itH Pnforccmcnt. against thP applicant
under certain
cin·11mstance~. Pnder r. 12, it is
provided that b!'fore a licence iH granted undor the
Rules, the Customs·•·ollector shall require the appli-
"ant to enter into a bond in Form 'C' for the du!'
observance of thesP Rules and the conditions of
his licence and
al~u to furniBh a 6ccurity of
n~. 3,000 in C'ash or socuritics and a solvent
Hll!'ety for a sum of Rs.
2,000.
'fl1f' surety is
required to execut!' a separate bond in Form 'D'. A
provi8o addccl lo the Rulo say8 that the security
may he increaKen or dccrea.setl by the Cust-Oms·
collector at anv time, Hhould he consider it
1tece8sary to dos~. having regard to the volume
and t~·pe of th" busincs• which the applicant will
transaC't as Custom
House Agent. It may bf'
mentioned here that the four classes of a.gent~
which had grown in the past have now been fused
in to one, and an agent under the HuleH may not
1·onfinc hi" activities to those of any one or more
nf the four classes previously existing. Objection,
however, is taken to the basic figure of the security
and particularly, the cash security of Ra. 3,000,
which are innovations under the present Rules.
Reference is made to the provision~ of Form 'C', in
which it is provided as follows :
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