Chandrakant Krishnarao Pradhan and Another v. the Collector of Customs, Bombay and Others

Judgment

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. 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. Gopala- L 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. Ghandrakant K rishnO,Ciro Pra.dhqri . "The Collutor <;>f. Cust'?m.s, B.o.'o/'~Y or.andrakanJ Kriahnarrio Pradhan 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 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 Ghandrakant Krishnarao Pradhan Tiw Collector of Customs, Bom~ay Hidayatullon J. Chandrakan> }i·rishnar(J/) PradW. 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 SUPREME COURT REPOR'IS 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 GhmidrDJtan·t~ KrUhnar4D Pf'ad-han Th~ Collector of CUatom1, Bombay HidaJalu!la1' J. 11161 Chandrakant Kria""4rao Pradlwr 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, thenumber 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 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 n., C./lt<lor of Cu.•toms, Bombay Hidayatullah .I. [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 1 3S.C.R. 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. CIUwiralcan t Xr/1/mtlrao Pradhan -Tht Collector of .Cuat~.t, Rombay W•layalullah J. 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 3S.C.R. 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 Pro4""" 77w C.U•clo• of °""""'• Bombay H;day ... llah .T. [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, 3S.C.R. 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 Chandrak""t Krishnaroo I'radhan The C•llector of CuBtom8, Bombay Hiiayatullah J, chandralehnt Kri1hnarao Pradhan Tht Colltetor of 0 Cu•foirt•~ B()flfbay · ft;J;;;i~iah J. [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\~ J :j S.C.R. StJPnEMl!.: COURT REPORTS 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 Chandrakatit Krtalinarao Pradhan, 'l'he OoU"tor of Cu~toms,. Bombay Hirla'fjatullaft J. Cha•drakard 1\riehltarao Pradhan TJo, ColluiM of CUlro,..,B~ RidayaluUah J. [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 : l t 3 s.C.R. SUPREME couttr REPORTS "It is also agreed and declared that the President of India may apply the above snm of Rs .......... in making good wholly or in part any short collection of duty or other charges in respect of any transactions made by the said ...... an behalf of importers in the event of such sums remaining unpaid, even after issue of demands under section 39 of the Sea Customs Act."

The petitioners contend that the increased security, particularly, in cash, puts an unreasonable restriction upon the right to, carry on the profession or avocation. They point to the fact that in the past a. security of Rs. 2,000 had been considered adequate, and from 1937 onwards, that security alone was demanded. They also contend that as Dalals they arc only required to present the shipping bills and the assessment or appraisement of the customs duty is the function of the Customs Officer. If any mistakes are made, due to an error on the part of the Customs-authority, or even due to a wrong declaration of the real value of the goods by the importer, the collection of duty should be made from the owner of the goods and not from them. They also contend that this is the.meaning and intent of s. 3!l, which, iu terms, makes the owner of the goods liable to make up for the short "ollections and puts no responsibility on the agents.

They further contend that the last clause of the - bond, quoted earlier, makes the agent liable for payment of the balance of the duty before any attempt is marle to recover it from the owner or importer. The last point need not detain us long, because it is raised on the existence of the word "even" in the clause "even after issue of demands under section 39 of the Sea Customs Act". The word "even" does not _mean that the agent's security can be touched before the notice is given. It rather indicates that the security would be utilised to make up the deficit only when a notice Chandraknnt Krishnarao Prad/iat1, The Collector of ' OuBtome,- Bombay llidayatullah J. Chandt!lka,1t. Krishnarao Prallilln. 1'he Coll<elor of Gu.toms Bombay Hidoyutullah J. SUPltEM]; couwr Rl!:PORTs (19~:lj . b givcli and if cvPn >tfter notic'<' there is cumpli rncc.

This wCJuid indicate that before the 'ecu:ity .is so utilised, a notice must go to the agent or his prmc1pal, am! the bond makes the notice a 8ine qua non of an action to recoup the deficit duty from the security amount. The larger question whether the agent can ht: m,1dc rcsponsibk for the short collection of duty under s.3!J may lw deferred for th<> moment. Previous to the promulgation of the Rules, there were, as already stated, four classes of Agents, and their duties, by custom and usage, wero also different. It is now contemplated to make a single class of agents and also to restrict the number of such agents. It is quite clear, therefore, that the amount of business which would be done by the agents who arc licen~ed, would grow signiffoantly. Also, each agent would be entitled t-0 do all kinds of businesses which were handled Reparately.

This justifies the demand for increased security, and it should be noticed that there is room for tho reduction of the dutv in individual cases, if the amount of businesii which the agent would carry on, would be Arnall. Similarly, there is provision for demanding increased security from a persqn who does o!· is expected ,to do a much larger amount of busmetlS as an agent. There is thus no room for a proper adjustment of tho amount of securitv to be obtained from each individual licensed agent, commenllUratc with the volum~ and type of busin<'s~ which he will transact. We do not, therefore, consider that r. 12 is defective on this ground. Before we deal with s. 30, it is necessary to review certain other sections of the Sea CustomB Act. Under the Sc·a CustomH Act, it is not obliga.tory upon a principal to appoint licensed agent.

An importer or exporter, as tho OMO may be, can also appoint any person with the appro,val of the CUlltoms-qo.Ucctor ,.~ r ...1 a s.c.:R. i.29 his agent, .who need not be a licensed agent. (R.3). The Rules are meant to control action of agents, particularly the licensed agents. Under the Act, the position of an agent, whether licensed or not, is indicated in s. 4, which reads : "When any person is expressly or impliedly authorized by the owner of any goods to be his agent in respect of such goods for all or any of the purposes of this Act, and such authorization is approved by the Customscollector, such person shall, for such purposes be deemed to be the owner of such goods." One of the duties of the owner of the goods is to make a declaration of the real value of the goods in a bill of entry or shipping bill. Under s.

29, on the importation into, or exportation from, any customs-port of any goods, whether liable to duty or not, t.he owner of such goods must, in his bill of entry or shipping bill as the case may . be, state the real value, quantity and description of such goods to the best of his knowledge and belief, and must subscribe a declaration of the truth of such statement at the foot of such bill. Under the same section, the Customs-collector may require the production of invoices, broker's note, policy of insurance or other document to satisfy himself about the real value, quantity or description of such goods. The Customs-Collector is also authorized to inspect the goods for the same purpose. Under ss.

29A and 29B, there may be an assessment of duty prior to the examination of the goods and a provisional assessment of duty and its payment even prior to the production of the documents above mentioned or the inspection of the goods. _ Section 30 of the Act defines "real value" and that is the value on which the assessment of the goodH takes place. That section is not dependent upon the declaration of the owner, but defines "real value" in terms of a formula which, on its application determines the real value, apart from any declaration. Chandr,a1canf Krishnarao Pradhan Th£ Collectar of Custo~; ·Bombay (,hatdrakanl J(ri1hnarao Pradhan ·nae Colleaor of (,'u.tom.a, BcJmbay //idayatullah J. l3o SUPRE!lfE COURT REPORTS [1962] 8cction 31 provi<lcH for the examinafio11 of ad mloreui goods, and if the real value of such goods i~ correctly stated i11 the bill of cntrv or shipping bill, the goods aro asses.,rcl i11 acC'ordance therewith.

Section :l:! provid<>s for the procrdurc, if it appears that such goods are properly c:harj.(eable with a higher rato or amount of duty than that to which they were subject according to the v•tlUP stated in the bill of entry or shipping hill. The Officer may then dC1tain tho goods and collect the proper duty. Sections 33, :HA and :l5 deal with abatoment allowed or disallowed under certain circumstances. Sections :rn, 37 and :l8 deal with the alteration of impo1t and export duties or tariff yaluations. When the proper duty has been paid according to the checks and inspections, if "ny, the goods are allowed to he cleared. Section :rn, as the margi11al note sh~w6 correctly, deals with payment of duties not levier!, short-levied or erroneously refunded. The first eubscction provides as follows : "( l)

When c11Btoms-duties or charges have not been levied or have been short-lovicd through inadvertence, error, or collusiou o.r misconstruction on the part of the Officers of Customs, or through mis-statement as to roal value, quantity or description on the part of the owner, or when any such duty or charge, after havi11g been levied, or has been, owing to any such cause, erroneously refunded, the person cl1argeablc with the duty or charge which has not been levied or which has been so short-levied or to whom such ref11nd has erroneously been made, shall pay the duty or charge or the deficiency or repay the amount paid to him in excess, on a notice of demand being iss11ed to him within three months from the relevant date as defined in sub-section ( 2); 3 s.d.:R. and the Customs-collector may refuse to pass any goods belonging to such person until the said duties or charges or the said deficiency or excess be paid or repaid."

The second sub-section need not be quoted, beeause it does not bear upon the controversy. The contention of the petitioners is that although in the first paragraph of s. 39( 1) the word "owner" may comprehend an agent who is deemed to be an owner, if authorised under the Act, the section does not use the word "owner" in the latter part, and speaks of "the person chargeable with the duty", meaning thereby 8 change over to the real owner of the goods in contradistinction to the agent. They urge that this is even more apparent from the words of the fourth paragraph of the first subsection which authorises the Customs-collector to reftise to pass any goods belonging to "such person" which must mean the goods belonging to the real owner; who is properly chargeable with the duty. It is contended, therefore, that as the agent is not within the reach of s.

39, the demand of dut'V from him cannot be made, and that the provisions· of the bond by which. the agent and his security are made liable, are beyond the provisions of s. 39 and thus invalid. One thing is clear that the Customs-authorities may have no dealing with the real owner of the goods where the agent has been authorised to deal with them for the purposes of the Sea Customs Act or any of its provisions. Section 4 clearly lays down a fiction, that if the agent is authorised by the real owner in respect of any of the matte1·s in the Act, the Customs-authorities would deal with the agent as if he were the owner. The effect of the fiction is, therefore, to make an agent answerable to the Customs-authorities within the four corners of his authorisation. The fiction operates only within those limits. ·An agent may be authorised Chandralcant Kriahnarao Pradhan '[!he Collector of Cu1:1tomfJ;--Bombay H,idqyatullah J, 1~~1 ChaJViz4kat1t Kria/uJ,orao Pratlha"

Tiu CaUe.cfor of ":'11.n"oml, Bomb"aJ· TJidaya1ull4h .J. t Sttl>REM.E_dOUR1' REPORfS to declare the real value and to pay th11 customs duty or other <'harges. If an agent is authorised in this manner, under the fi<'linn created by F. 4 he would be regard<>d as th<' owner and would be rlealt "-ith as eur·h. ln· the 0ustomst: - authorities. ft has alrea1ly bPcn pointed out that the reaJ ,·alue, quantity and description of the goodH h:ivc to hr· declared in the hill nf Pntr~· or the shipping !,ill. A form "-as shown to us at the hearing in which the declaration has to he made either by the real owner or the agent. Th" form emphasis also that all responsibility for t ht> deelaration and for the payment of the proper duty and charges may ha taken by an agent. Onn· an agent haA made a rleclaration am\ h:u; also been authorised to pa~· the r\ut\" etl'., it is to him thatth<' Cnstomsauthoritie,;i woulcl look for payment or additional payment, and it is. to him that refunds would bf' made.

The Uu~toms-authoritie' would not deal "'it.h the real owner, and that ii; the S('hemu of the Act. When s. :l\J sa.v~ that where customs duties or c:hal'ges have not been leviPd or h:we beon short. lovied through ina1h-ertcnce, error. eollusion or mis· construction on the part of the ofliccrs of Customs, or through mis-statement as to real value, quantity or <iPseription on the part of the owner, it refers not only to the l'l'al own<'r, hut abo to an agent, if the latter can he dcenll'rl to be the owner. 'l'his is, indeed, conceded by the pctitioncr8. The question .then arises, wlmt does the sectio11 mean when it speaks .of "the person chargeable with the duty or charge which has not been levied or which has bePn so short.-levied, or to whom such refund has erroncouslv been made"? Obviously enough, thc pernon to Le chargl·cl, iJ1 so t'ar as the Customsauthorities arc concerned, is not the real 01mor but the agent, a fictional ow1icr of the goods.

If a 'fictional owner' can be read into the first part I 1 of the section, there is no reason why the words "the person chargeable with duty" cannot also be applied to him, In the circ11mstances in which the agent makes a declaration with authorisation from the real owner, the agent is the person chargeable with the duty. Otherwise, for the duty chargeable in the first instance the agent would be the person chargeable with the duty, and for any short payment he would cease to be such a person and the Customs-authorities would have to deal with the real owner, who mad0 no declaration or payment. The words "the person chargeab1e with the duty ... ", therefore, have advisedly heen used not to exclude the agent hut to describe in a neutral way the person from whom such a demand can lie marle. They are wide enough in their ambit to take in, not only the real owner but also a "deemed owner" under the Act.

So far, there is no difficulty, and the objection of tho learned coullRol for the petitioners that a simpler metho<l would have been to use the word "ownN" in this part of the section, is· without substance, because the legislature may express its meaning and intention ~n differt'nt ways. The critical argument, howeYer, is on the fourth paragraph of s. 39(1). There, it is provided that if the excess charge is not paid, "the Customs: collector may refuse to pass any goods be longing to 'such person' until the said duties or charges or the said deficiency or excess be paid or repaid". It is contended that an agent deals with numerous owners at the same time, and if this paragraph is applied literally, then the Customs-collector would be entitled to refuse to pass the goods belonging to other 01Vncrs, handled by the same agent. This argument, in our opinion, does not represent the true state of the law.

An agent, when he works for different owners with authorisation, . undoubtedly becomes a fictional owner of the goods )t.. belonging to them; but he does not become a , single. owner in respect of the goods . belonging tQ OhanW!alw.nt K ri8hiiaiao Pradlian The Collector of CuBtumtt, Bombay Hidiryatu!lah J. GMlllrakant K'ri6hn'lrao PY.ad/um The Colltctor of ~t,,...,./Jombay Hid<Jll"lullah J. SUPREME OOURT REPORTS (1962) different olient.e. He becomes an owner quoad ca-0h client, and his owno1'Ship of the goods is diversified ~ - and is not one. The agent, therefore, stands in the shoes of several persons at the same time, and is himself a multitude of owners. It is only when short payment has been made in his capacity as one fictiomd owner, that he can be asked to pay that which he ought to have paid in the first instance. He is exposed to tho penalty of having .

A hiA goods detained in the same <'.apaeity as owner q1wad his defaulting client, and the goo<lH within his control for the same client will be detained until tho duty luis been paid. It is only tho goods of tho defaulting owner in respect of which he is also the deemed owner, that would suffer the penalty of detention but not tho goods of a different owner, oven though the agent may be authorised to deal on his behalf. It is in this way that the section must be read without contradiction in its several parts, because to read it as suggested by the petitioners, creates a contradiction between the first paragraph and the other paragraphs that follow. An authorised agent is an owner for all purposes of the Act (including payment of duty). If one were to say that in the other paragraphs of s. 39(1) he is not included, then the fiction which is created bys.· 4 would cease to be worked out to itll logical limits. Once it is held that the words "the person chargeable with the duty .........

" are apt to describe not onlv the real owner but also his authorised agent (ancl there is no reason why thCBe words should be restricted), the fourth paragraph falls in lino with tho others, and the ownership of the agent is, thcreforo, limitccl to one client at a time, and the goods of that client of which the agent is also the deemed owner, are exposed to the penalty of detention. It must be remembered that the Aot makes the 'goods' liable to duty and the payment of duty by owners clears tho goods. The law goes further, and says that other goods of the ~ awner.are also liable for any deficit, if the ~ood~ SUPREMEOOURT REPORTS liable to duty are 'cleared' before the full duty has b~en paid.· ' ' The condition in tile bond is limited by the operation of s. 39 to the transactions of one constituent at a time, and the forfeiture of security is also limited to the constituent in default.

The bond prescribes for recouping of the deficiency in the customs duty or charges from the security, even after notice is given. This notice must he given withil1 three months from the relevant date as defined in the section. The limit of three months also applies to the agent as the deemed owner in the same way as it does to the real owner. If no notice is given, then the bond, on its own terms, cannot be ·enforced. In our opinion, the contentions of the petitioners are not sustainable. In the result, the petitions must fail except to the extent that we declare r. lO(c) to be an unreason'1ble restraint upon the right of the petitioners to carry on their avocation, and r. II when it prescribes a renewal fee of Rs. 50, invalid inasmuch as it has provided not for a fee but for a tax. Subject to this, the petitions are dismissed. The petitioners will pay the costs of the other side (one set only), as they have lost substantially.

SUBBA RAO, J.-I have had the advantage of perusing the judgment prepared by my learned brother, Hidayatullah, J. I agree with him exeept in regard to r. 6(c) of 'the Custom House Agents Licensing Rules, 1960 (hereinafter called the Rules). Rule 6(c) sRys: "An applicant for a licence shall furnish an income-ta:x: clearance certificate." The Rules were made to regulate the conduct of the clearing agents so that they may discharge their duties to the satisfaction of not only the Customs Authorities but also the public. In my view, the production of income-tax clearance certificate is e:x:traneous to the issue of a licence to a customs house agent. How cloes the production of such a certificate improve the credentials of an appli9ant ·1961 Chandrakant K.riahpo,rao Pradh<in The CoUeetor of Omloini, Bombay Hidayatullah J. Subba I ao.T. Chi:andrak.ot1t K,.i4Jincwno Pr!Ulhu11 The C-Olltelcr of l'u.ttoms, Bombay Subha Rao .T, l3G [1962 for selection as a customs house agent ?

An applicant may be financially sound and also otherwise duly (1ualified; he may have discharged all his debtil, an<l paid all his taxes except a small portion of his income-tax : he may not have paid the income-t.1X for good reasons. Yet, if he docs not produce the income-tax clearance certificate, he is disqualified. What is the reasonable nexus Let\rncn the production of such a. certificate and a person's right to rlo business as a. clearing agent ? Ther1• is none, except a remote md fanciful presumption that a man who pays the income-tax may also pay the dues payable to the Customs Authorities. In](. Raman & Co., Tellicherry v. State of Jfodms ('), in the context of issue of a licence under the Yarn Dealers Control Order, as Judge of the Madras High Court, I have held, ''The fact that a person is in 1•rrears of income-tax is not germane to the issue of a licence under the Yam Dealers Control Order. It is a cireumsfance extraneous to the petitioner's right to carry on his business.

The Income-tax Act provides an adequate machinery for realising the arrears due from an asscsscc. I am of the view that the restriction imposed is unreasonable an<l is not in the interests of thl' general public." I still udhero tu that view .. Every taxing Act has a machinery for collecting the tax imposed by it, but the said rule, in effect 11.ncl substance, provides for an additional machinery for collection of income-tax. I would, therefore, hold that the nonproduction of an income-tax clearance certificate is not germane to the issue of a licence under the said Rules. I would therefore strike out r.6( c) of the Rules on the ground that it constitutes an unreasonable restriction on the right of an appli'cant to do business as customs house a$ent. (IJ,A.I.R, 1953 Mad. 84-: J ... 3·'S.C;R. BY COURT :

In accordance with the opinidn · of th~ majority, the petitions must fail except to the ext"Jnt that we declare r.10 (c) to be an unreasonable restraint upon the right of the petitioners to carry on thei.r avocation, and r. ll, when it prescribes a renewal fee of Rs. 50, invalid inasmuch as it has provided not for a fee but for a tax. Subject to this, the petitions are. dismissed. The petitioners will pay the costs of the other side (one set only), as they have lost substantially. Petitions dismissed except for sl·ight mod·ifi· cation. COMMIS8IONER OF INC0.\1E-TAX, KERALA AND COIMBATORE PUTHIYA PONMANICHINTAKAM WAKF MANAGER P. P. AYESHA BI BI (P. B. GAJENDRAGADKAR, K. SuBBA RAO and M. H!DAYATULLAH, JJ.) Income Tax-Wakf-AssesBment-If must be in tlte status of individual or as association of persons-llfut(J;waU.i, 1j a trustee-Indian Income-tax Act, 1922(11of1922), s. 41(1), First proviso-MuBBalman WakfValidating Act, 1913 (6 of 1913), ss . .3,4.

The question for determination in the appeal was whether the wakfin question should be assessed to tax under s.41(1) of the Indian Income-tax Act. 1922, through the manager as individual or as an association of persons at the maximum rate under the first proviso to that section on the ground that the individual shares of the beneficiaries were indeterminate and unknown.

The wakf deed directed the mutawalli to do acts necessary for charitable purposes and to meet the maintenance expenses of the wakif's children, grand-children, the female children born in the future and the male children born to the said female children and after payment of taxes and meeting of expenses for repairs and maintenance of properties, to utilise the l!alance of the income for daily necessary expenses of the house and for food for purchasing dresses and other necessities for the male and female members of the tarwad, for conducting specified ~eremonies, for feeding the poor and for meet_ing such. other necessary expenses and thereafter to utilise lhe balance, if any, in acquiring properties yielding good income. Chandra/cant K rishnarao . P'l'ad,ha,n The Colledo'I' of Customs, Bombay Suliba Rao J. AUifUst 14.