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It may be mentioned that the Customs Act repealed the Sea Customs Act, 1878 under which Customs House Agents Licensing Rules 1960 had been framed (hereinafter referred to as the 1960 Rules).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.
(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
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
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 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 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 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
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.