80 80A 81 and 116 to 213 of 1960
Petitions under article 32 of the Constitution of India for enforcement of Fundamental Rights
section V Gupta M C Bhandare section 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 Xenon for the respondents
Porus A Mehta J R Gagrat and G Gopalakrishnan for the interveners
August 11
The judgment of Gajendragadkar Hidayatullah Shah and Raghubar Dayal JJ was delivered by Hidayatullah J Subba RaoJ delivered a separate judgment
112 HIDAYATULLAH J  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 filed by two petitioners
One petitioner holds a permanent  licence and the other a temporary licence renewable triennially to work as Dalal s at New
Customs House Bombay
In the other petitions also petitioners Nos
1 to 50 hold permanent licences and petitioners Nos
51 to 99 hold temporary but renewable licences
Some of the permanent licences were issued in 1936 and some of the temporary licences were issued as far back as 1944
These licences whether permanent or temporary were issued under s202 of the  prior to its amendment by the Sea Customs Amendment Act 1955 Act 21 of 1955
They were issued after a brief enquiry and subject to the fulfilment by the applicant of the following conditions  1 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 a security of Rs 2000 in cash or Government paper having an equivalent market value and execute a Bond for Rs 2000 on It fifteen rupees Stamp Paper in the attached form
 In 1955 by the amending Act s202 was substituted by another section
The section now reads  202
1 With effect from such date as the Central Government may by notification in the Official Gazette specify no person shall act as an agent for the transaction of any business relating to the entrance or 113 clearance of any vessel or the import or export of goods or baggage in any Custom house 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 out 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 licensee 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 section
These rules were framed and public notices were issued
inviting applications  but the dates were postponed 114 till the rules were published in the Gazette on May 14 1960
It is not necessary to refer to the prior history of these rules and to the many representations that were made as they are not relevant
On June 18 1960 a public notice No 87 was issued fixing June 25 1960 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 June 27 1960 Writ Petitions Nos 80 and 80A of 1960 were filed followed by Writ Petitions Nos 81 and 116 to 213 of 1960 filed on July 12 1960
An ex parte ad interim stay of the revocation of the existing licences was obtained from this Court and subsequently the respondents undertook to issue to the petitioners special temporary licences renewable yearly till the disposal of these petitions
Prior to the
Custom House Agents Licensing Rules 1960 there were four classes of Agents
They were 1 Clearing Agents 2 Dalals 3 Muccadams and 4 Baggage Clearing Agents
According to the petitioners there were 100 licensed Clearing Agents 200 licensed Dalals 270 Muccadams and about 15 Baggage Clearing Agents
The duties and functions of these four classes of agents were different
Whether these distinctions were always maintained and whether they grew out of regulations or usage is hardly necessary to enquire
By the Rules of 1960 these classes were merged into one and all licensed agents were placed on an equal footing
In other words there is to be hereafter one class of agents  Though the petitioners holding permanent  licences and the petitioners holding temporary licences with a term to run out have relied upon the fact that their licences are still valid there was no serious attempt to deny that under section 2021 they would be rendered ineffective after the date to be fixed by Government
The permanent  licences 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 s202 was challenged as being void or ultra vires
In these petitions only the Rules ire challenged as in breach of the fundamental rights under articles 14 and 19 of the Constitution and Also as being in excess of the rule making power conferred by sub section 2 of section 202
Form 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 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   in general and section 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  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 s202  provide sub section
1  or to provide for the matters mentioned in cls
a to f of section 2022
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 116 is made specially of Form O  prescribed by the Rules under which the agents personally and the security furnished by them have been made liable for short collection of Customs duty etc
The question whether the agents are liable in any event
for such short collection under section 39 is a question which will have 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 by a 9 of the 
under section 2022 the Chief Customs authority is empowered to make rules for the purposes of t hat section
That purpose is the licensing of agents and the regulation of their conduct and functions
But the Chief Customs authority is also empowered by section 9 to make rules consistent with the  generally to carry out the provisions of this Act
The power to make rules under section 202 is not the only power which the Chief Customs authority can exercise and it is only too clear that power can also be derived from section 9 if there be need
Thus if it is necessary that the agents must carry out certain provisions of the Act a rule can be made in the exercise of the two powers together
Though the impugned Rules are headed as framed under s202 of the  they cannot be questioned if they carry out not only the special purposes of s202 but also certain other purposes of the Act because the two powers will concur to sustain them
It is only when a rule or rules are pointed out which subserve neither the special purpose of the section nor the general purposes of the Act that they can be successfully questioned
In short therefore the petitioners  case on the individual Rules alone remains to consider
The first contention is that under the impugned Rules the number of licences to be granted at the Customs House can be limited by the Customs
collector and that applications can only be made if the Customs collector publishes a notice inviting 117 applications
This restriction it is contended is unconstitutional as 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 bearing upon these matters are rr4 and 8
The latter Rule says that the number of licences to be granted would be fixed by the Customs collector having 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 processions or trade has sometimes to be limited in the public interest When we pointed out to Mr Gupta that this kind of limitation on the number of persons allowed to hold licences is 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 operators might have been given licences on production of proof that they 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 chance to have his case examined
It is to be expected that the most exprienced and the most efficient will get preference and
no claim can be made on behalf of the incompetant and the inefficient that they should 118 receive equal treatment
Once the number is limited to the requirements of the business it is manifest that the Customs collector will invite applications only as and when occasion demands
These Rules in our opinion cannot be said to  offend against the Constitution
The next contention is about rr6a b and c 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 and business in the event of his being granted the licence
The applicant has also to furnish an income tax clearance certificate
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 a class barrier between the rich and the poor and only the rich were to be preferred
By the words financial status is not meant that the applicant must be a 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 financial position 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 embarrassed and an enquiry into financial status is so much in the public interest that we cannot say that the condition must necessarily be unreasonable
Similarly the argument
that new entrants would find it difficult to assure that they would have sufficient clientele and business and would thus be discriminated against is not correct
The Customs House is not a place where persons can allowed to learn a 119 profession or to take a chance
The movement of goods the due performance of the duties and functions under the and observance 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 lie would be in a position to handle the work in the Customs House from the moment he is licensed
The Rule is designed to avoid entry into the Customs House premises of persons who being there are unable to do business and merely add to the number of persons present
The 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 vs State of Madras 1
In that case it was hold that the fact that a person was in arrears of income tax was not germane to the issue of a licence under the Yarn Dealers Control Order 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 income tax 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
1 AIR 1953 Mad 
8A 120 insistence upon the production of the certificate is in our opinion connected with the enquiry into his respectability and financial status
to find out if he can be trusted with other persons  money and goods
The next Rule which is questioned is r 9 which provides for an examination of the applicant
This examination follows a scrutiny of the application under the other Rules and embraces questions on various subjects
The duties of the agents require them to handle goods and the examination is designed to find out whether a candidate knows the elements of the law relating to the arrival entry and clearance of vessels and goods
Objection is not raised to the examination as a whole but only to cl
p of r 9 2 under which a candidate is supposed to know the procedure in the matter of refund of claims appeals and revision petitions under the 
It is contended that these are matters in which an agent is not interested as an agent but are matters for the owner and the Castoms authorities to know
It is true that the curriculum for the examination is somewhat extensive  but it is also clear that what is expected of the candidate is knowledge not necessarily exhaustive but sufficient of the laws relating to the arrival entry and clearance of vessels and goods
We do not think that it is wrong for the
authorities to insist upon at least a working knowledge of the laws applicable to the kind of work the agents are required to do
When licences are issued under other laws a candidate is sometimes required to answer questions relating to the law under which the licence is issued
One well known example is the questioning of a candidate about the rules of the road when he is issued a licence to drive a mechanically propelled vehicle
These Rules advance efficiency and the additional know ledge about refunds appeals and revisions under the Act may be necessary where an agent handles 121 goods of a principal who is himself not present to file appeals or revisions or to claim refunds
The 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
It is said to confer a very wide discretion on the Customs collector and reference is made to sub r2 in which it is provided that no appeal shall lie from the order
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 grant 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 101c
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 by 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
follows an examination If a  candidate satisfies all the above condition s there would hardly be any ground left
for rejecting his application except probably his physical unfitness to
the work The Rule which is framed is so gel general that it leaves to discretion of the 122 Customs collector to reject a candidate for a trumpery reason which he need not state even though the candidate may be otherwise suitable
In out opinion if a candidate is found fit under the other Rules and has successfully 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 that order as they do in the other cases
As the Rule stands it cannot be considered to be a reasonable restriction upon the right of the successful candidate to carry on his avocation
The next Rule which is questioned is r 11 which enjoins the payment of a fee of Rs 50 both for a fresh application as well as renewal of the licence
In so far as the fee for the 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 fee is an amount collected to reimburse the Government for the expenses of licensing
It must reasonably be measured against the cost which may be entailed in the process of granting licences
In the initial stage the Customs authorities have to scrutinise applications subject the candidates to an examination and provide them with licences to carry on their work
A fee of Rs 50 initially may not be considered unreasonable regard being had to the services 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 is to make 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 fee there must not be an attempt to raise revenue for the general funds of the State
In our opinion a renewal fee of Rs 50 does not entail services which can be reasonably said to measure against the charge
It may be pointed out that though this averment was made in the petition 123 No attempt was made by the answering respondents to traverse it
In our judgment the renewal fee of Rs 50 ceases to be a fee and is in its nature a tax to raise revenue
Such an 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 rg and sub rk 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 Castoms collector and submit them for inspection to the Customs collector or an officer authorised by him
No exception can be taken to sub rg 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 the part of the Customs authorities 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 period of three days is too short  but it must be remembered that a large number of transactions may go through without the licensing authority being aware that the constitution of a firm has changed
The Rule is designed to bring promptly to the notice 124 of the Customs collector the change in the constitution of the firm so that he may be in a position to decide for himself whether the licence in the changed circumstances should be allowed to operate or be suspended or revoked
In our judgment this Rule cannot be questioned
Mr Porus Mehta who argued the case on behalf of the Clearing Agents stated that the newly constituted firm is required to make a fresh application which is to be dealt with in accordance with the provisions of rr 6 to 13
According to him every change in the constitution of the firm requires the firm to go through the entire process of scrutiny and examination which he  terms unnecessary
The rule is designed to ensure that the new members of firm answer the requirements which have been laid down is Rules 6 to 13 and these requirements may be necessary if newentrants come in
It is to be noticed that pending the disposal of the application the Customs collector is authorised by the rule in his discretion to allow the existing firm to carry on the business of Custom  House Agents
This softens the rigorous of the rule because the work of the agents in proper cases would not be hampered and the application would stand over for disposal to a later date
Rule 19 which also enjoins the maintenance and inspection of accounts by a firm was criticised in the same manner as was r 15 and for the reasons which we have given we hold it to be conducive to the proper control of the financial activities of a firm as licensee
Rule 22 deals with the cancellation of the licence for failure of the agent to comply with Any conditions of the bond executed by him under the Rules for failure to comply with any of the provisions of the Rules and for misconduct on his part which in the opinion of the Customs colloctor renders him unfit to transact business in the 125 Customs House
It is contended thatthe rules are so exhaustive and numerous thatno agent would ever be able to keep out of theoperation of that Rule and that he would be  perpetually exposed to the penalty of suspension or revocation of his licence
Rules are made for compliance and not for breach and even though strict they are all designed to ensure efficient and proper working on the part of the agents
A rule insisting upon such compliance with the other rules on pain of penalty _cannot be 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 unpaid servant  of the Customs authorities
This is one way of looking at the matter
The right way to look at it is that a profession is being regulated and the profession 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 damning
The Rules therefore subserve a very salutary and necessary principle and 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 126 have to be vigilant in preventing them
They must therefore see that they do not license the wrong type of person is and in the interests of the Revenue and more so in the inte rests of persons who employ licensed agents these Rules have been framed
Looking at the Rules generally we are of opinion that though they are strict they axe Absolutely necessary and their strictness would be felt only by persons who are not otherwise honest
The main argument in the case is upon r12 read with From It which is the bond which every applicant has to executive in favour of the President of India and its enforcement against the applicant under certain circumstances
Under r 12 it is provided that before a licence is granted under the Rules the Customs collector shall require the applicant to enter into a bond in Form C  for the 7 due observance of these Rules
and the conditions of his licence and also to furnish a security of Rs 3000 in cash or securities and a solvent surety for a sum of Rs 2000
The surety is required to execute  a separate bond in Form D 
A proviso added to the Rule says that the security may be increased or decreased by the Customs collector at any time should he consider it necessary to do so having regard to the volume and type of the business which the applicant will transact as Custom House Agent
It may be mentioned here that the four classes of agents which had grown in the past have now been fused into one and an agent under the Rules may not confine his activities to those of any one or more of the four classes previously existing
Objection however is taken to the basic figure of security and particularly the cash security of Rs 3000 which are innovations under the present Rules
Reference is made to the provisions of Form C  in which it is provided as follows 127 It is also agreed and declared that the President of India may apply the above sum 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 on behalf of importers in the event of such sums remaining unpaid even after issue of demands under section 39 of the 
 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 2000 had been considered adequate and from 1937 onwards that security alone was demanded
They also contend that as Dalals they are 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 section 39 which in terms makes the owner of the goods liable to make up for the short collections 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 made 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 
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 128 is given and if even after notice there is no compliance
This would indicate that before the security is so utilised a notice must go to the agent or his principal and the bond makes the notice a sine qua non of an action to recoup the deficit duty from the security amount
The larger question whether the agent can be made responsible for the short collection of duty under s39 may be deferred for the moment
Previous to the promulgation of the Rules there were as already stated four classes of Agents and their duties by custom and usage were 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 are licensed would grow significantly
Also each agent would be entitled to do all kinds of businesses which were handled separately
This justifies the demand for increased security and it should be noticed that there is room for the reduction of the duty in individual cases if the amount of business which the agent would carry on would be small
Similarly there is provision for demanding increased security from a person who does or is expected to do a much larger amount of business as an agent
There is thus no room for a proper adjustment of the amount of security to be obtained from each individual licensed agent commensurate with the volume and type of business which he will transact
We do not therefore consider that r 12 is defective on this ground
Before we deal with section 39 it is necessary to review certain other sections of the 
Under the  it is not obligatory upon a principal to appoint a licensed agent
An importer or exporter as the case may be can also appoint any person with the approval of the Customs collector as 129 his agent who need not be a licensed agent
R3
The Rules are me ant to control action of agents particularly the licensed agents
Under the Act the position of an agent whether licensed or not is indicated in section 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 Customs collector 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 section 29 on the importation into or exportation from any customs port of any goods whether liable to duty or not the 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 sections 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 goods 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 of the real value apart from any declaration
130 Section 31 provides for the examination of ad valorem goods and if the real value such goods is correctly stated in the bill of entry or shipping bill the goods are assesssed in accordance therewith
Section 32 provides for the procedure if it appears that such goods are properly chargeable
with a higher rate or amount of duty than that to which they were subject according to the value stated in the bill of entry or shipping bill
The Officer may then detain the goods and collect the proper duty
Sections 33 34A and 35 deal with abatement allowed or disallowed under certain circumstances
Sections 36 37 and 38 deal with the alteration of import and export duties or tariff valuations
When the proper duty has been paid according to the checks and inspections if any the goods are allowed to be cleared
Section 39 as the marginal note shows correctly deals with payment of duties not levied short levied or erroneously refunded
 The first subsection provides as follows  1 When customs duties or charges have not been levied or have been short levied through inadvertence error or collusion or misconstruction on the partof the Officers of Customs or through misstatement as to real value quantity
or description on the part of the owner or when any such duty or charge after having been levied or has been owing to any such cause erroneously refunded the person chargeable with the duty or charge which has not been levied or which has been so short levied or to whom such refund 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 issued to him within three months from the relevant date as defined in sub section 2 131 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 because it does not bear upon the controversy
The contention of the Petitioners is that although in the first paragraph of section 391 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 a 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 refuse 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 s39 the demand of duty 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 section 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 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 matters 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 132 to declare the real value and to pay the customs duty or other charges
If an agent is authorised in this manner under the fiction created by section 4 he would be regarded as the owner and would be dealt with as such by the Customs authorities
It bar already been pointed out that the real value quantity and description of the goods have to be declared in the bill of entry or the shipping bill
A form was shown to us at the bearing in which the declaration has to be made either by the real owner or the agent
The form emphasis also that all responsibility for the declaration and for the payment of the proper duty and charges may be taken by an agent
Once an agent has made a declaration and has also been authorised to pay the duty etc
 it is to him that the Customs authorities would look for payment or additional payment and it is to him that refunds would be made
The Customs authorities would not deal with the real owner and that is the scheme of the Act
When section 39 says that where customs duties or charges have not been levied or have been short levied through inadvertence error collusion or misconstruction on the part of the officers of Customs or through misstatement as to real value quantity or description on the part of the owner it refers not only to the real owner but also to an agent if the latter can be deemed to be the owner
 This is indeed conceded by the petitioners
The question then arises what does the section mean when it speaks of  the person chargeable with the duty or charge which has not been levied or Which has been so short levied or to whom such refund has erroneously been made Obviously enough the person to be charged in so far as the Customs authorities are concerned is not the real owner but the agent a fictional owner of the goods
If a fictional owner can be read into the first part 133 of the section there is no reason why the words the person chargeable with duty cannot also be applied to him
In the circumstances 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 charge able 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 made no declaration or payment
The words the person chargeable with the duty  therefore have advisedly been used not to exclude the agent but to describe in a neutral way the person from whom such a demand can be made
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 the learned counsel for the petitioners that a simpler method would have been to use the word  owner in this part of the section is without substance because the legislature may express its meaning and intention in different ways
The critical argument however is on the
fourth paragraph of section 391
There it is provided that if the excess charge is not paid 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
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 Owners 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 belonging to them but he does not become
a single owner in respect of the good belonging to 134 different clients
He becomes an owner quoad each client and his ownership 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 fictional owner that he can be asked to pay that which he ought to have paid in the first instance
He is exposed to the penalty of having his goods detained in the same capacity as owner quoad his defaulting client and the goods within his control for the same client will be detained until the duty has been paid
It is only the goods of the defaulting owner in respect of which he is also the deemed owner that would suffer the penalty of detention but not the goods of a different owner even 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 section 391 he is not included then the fiction which is created by section 4 would cease to be worked out to its logical limits
Once it is held that the words  the person chargeable with the duty   are apt to describe not only the real owner but also his authorised agent and there is no reason why these words should be restricted the fourth paragraph falls in line with the others and the ownership of the agent is therefore limited 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 Act makes the goods  liable to duty and the payment of duty by owners clears the goods
The law goes further and says that other goods of the owner are also liable for an deficit if the 135 liable to duty are cleared  before the full duty has been paid
The condition in the bond is limited by the operation of s39 to the transactions of one constituent at a time and the for feature 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 be given within three months from the relevant date as demand 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 10c to be an unreasonable restraint upon the right of the petitioners to carry on their avocation and r11 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 except in regard to r 6c of  the Custom House Agents Licensing Rules 1960 hereinafter called the Rules
Rules 6c says  An applicant for a licence shall furnish an income tax 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 extraneous to the issue of a licence to a customs house agent
How  does the production of such a certificate improve the credentials of an applicant 136 for selection as a customs house agent An applicant may be financially sound and also otherwise duly qualified he may have discharged all his debts and paid all his taxes except a small portion of his income tax he may not have paid the income tax for good reasons
Yet if he goes
not produce the income tax clearance certificate he is disqualified
What is
the reasonable nexus between the production of such a certificate and a person s right to do business as a clearing agent  There is none except a remote and fanciful presumption that a man who pays the income tax
may also pay the dues payable to the Customs Authorities
In K Raman  Co Tellicherry vs State of Madras 1 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 arrears of income tax is not germane to the issue of a licence under the Yarn Dealers Control Order
It is a circumstance 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 assessee
I am of the view that the restriction imposed is unreasonable and is not in the interests of the general public
 I still adhere to that view
Every taxing Act has a machinery for collecting the tax imposed by it but the said rule in effect and substance provides for an additional machinery for collection of income tax
I would therefore hold that the nonproductive of an income tax clearance certificate is not germane to the issue of a licence under the said Rules
I would therefore strike out r6c of the Rules on the ground that it constitutes an unreasonable restriction on the right of an applicant to do business as customs house agent 1 AIR 1953 mad
137 BY COURT In accordance with the opinion of the majority the petitions must fail except to the extent that we declare r10 c to be an unreasonable restraint upon the right of the petitioners to carry on their avocation and r11 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


Summary:
The petitioners were working as Dalals at New Customs 109 House Bombay under licences issued under section 202 of the Sea Customs Act 1 878
In 1955 by an amending Act section 202 was substituted by another section and by sub s1 of section 202 it was enacted  no person shall act as an agent for the transaction of any business relating to the entrance or clearance of vessel or the import or export of goods or baggage in any custom house unless such person hold  a licence granted in this behalf in accordance with the rules made under sub section 2 
By sub section
2 the Chief Customs authority was empowered to make rules for the purpose of carrying out the provisions 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 thisAct such person shall for such purposes be deemed to be the owner of such goods
The petitioners who after the enactment of the news202 had to apply for licences to be granted in accordance with the rules framed under sub s2 challenged the validity of certain of the rules on the ground that they contravened articles 14 and 19 of the Constitution of India and also that they were in excess of the rule making power conferred by s202 2
In particular they questioned power validity or r 12 under which inter alia the agent was required to enter into a bond in Form C by which he was made liable for short collection of customs duty under section 39 and also to furnish security which might be increased or decreased by the Customs collector
Held  1 that the rules in question though they were headed as framed under section 202 of the  cannot be impugned on the ground that some of them go beyond the special purposes of that section and seek to further some of the general purposes of other parts of the Act since the Chief Customs authority is also empowered under section 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 article 19 of the Constitution as they are only designed to advance public interest
3 that rr 6a and 6b which require the applicant to furnish to the Custom s collector satisfactory evidence as to his respectability reliability and financial status and that he would be in a position to muster sufficient clientel 110 and business in the event of his being granted the licencee are reasonable restrictions within the meaning of article 196 and are valid
4 that cl
p of r 92 whicn requires the licensee to have a working knowledge of the procedure in the matter of refund of claims appeals and revision petitions under the  is valid since it is necessary where an agent handles goods of the principal
5 that r 10 1c which gives the Customs collector a wide discretion to reject an application for the grant of a licence if he considers the applicant to be not suitable is an unreasonable restriction upon the right of the successful candidate to carry on his avocation and is invalid
If a candidate is found fit under the other rules and has successfully 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 of Rs 50is 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
15g 15k 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 are valid
8 that r 22 which enables the Customs collector to cance a licence for non compliance by the agent with the other rules or for misconduct on the part of the agent which in the opinion of the Customs collector renders him unfit to transact business in the Custom House is within the rule
making power of the Customs authorities and is valid
9 that the words the person chargeable with the duty or charge in section 391 of the
Act are wide enough
in their ambit to take in not only the real owner but also a deemed owner within the meaning of s4 of the Act
10 that on its true construction of s391 it is only the 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 111 even though the agent may be authorised to deal on his behalf
11 that r 12 read with Form C which makes an agent liable for short collection of customs duties under section 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 6c 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 fie can be trusted with other persons  money and goods and is valid
K Raman and Co vs State of Madras A I R 1953 Mad
84 distinguished
Per Subba Rao J Non production of an income tax clearance certificate is not germane to the issue of a licence under the Custom House Agents Licensing Rules 1960 and the principle in K Raman and Co vs State of Madras A IR  is applicable
Accordingly r 6c constitutes an unreasonable restriction on the right of an applicant to do business as Custom house agent and is invalid