TaxTMI 
TaxTMI 
2010 (10) TMI 674
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....petition, Your Lordships may be pleased to stay the operation and implementation of Notification dated 8-4-2010 and public notice fixing date for examination dated 22-4-2010; [D] In ex-parte ad-interim relief in terms of [C] may kindly be granted; [E] Such other and further reliefs as may be deemed just and proper may kindly be granted." 2. Since facts involved in all these petitions are more or less similar and the same involve common questions of law, all the petitions were heard together and are disposed of by this common judgment. For the sake of convenience, Special Civil Application No. 6152 of 2010 is treated as the lead petition and reference is made to the facts as appearing in the said petition. 3. Before adverting to the facts of the present case, it may be necessary to refer to certain statutory provisions so as to understand the facts in proper perspective. 4. Section 146 of the Customs Act, 1962 reads thus : 146. Customs House Agents to be licensed. - (1) No person shall carry on business as an agent relating to the entry or departure of a conveyance or the import or export of....
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....d (3) of Regulation 5 as the case may be, shall prove to the satisfaction of the Commissioner that : (a) the applicant is a graduate from a recognised University and is an employee of a licensee and that the possessed a permanent pass in Form G prescribed under regulation 20 and has the experience of work relating to clearance of goods through the Customs, for a period of not less than three years in the capacity of such a pass-holder : Provided that the Commissioner may relax the possession of permanent pass in Form G to one year for reasons to be recorded in writing. (b) the applicant has financial viability supported by a certificate issued by a Scheduled Bank or such other proof acceptable to the Commissioner evidencing possession of assets of the value of not less than Rs. 1 lakh in the case of applicants for the grant of licence in respect of any one of the Customs Stations at Bombay, Calcutta, Madras, Cochin, Kandla, Goa, Mangalore, Tuticorin or Visakhapatnam and not less than Rs. 50,000/- in the case of each of the other Customs Station, situated at places other than those specified above : Provided that in cases where a Commissioner's jurisdiction extends to ....
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.... of Customs shall satisfy himself that the requirements of Regulations 10(1) (a) and 10(1)(b) had been fully met by the applicant. (2) Any person, whose application for grant of temporary license under sub-regulation (1) of regulation 8 is rejected by the Commissioner of Customs may represent to the Chief Commissioner of Customs or Chief Commissioner of Customs and Central Excise, as the case may be against such order rejecting the grant of a temporary licence, within 30 days of the communication of the impugned order. (3) In case the number of applicants fulfilling the conditions prescribed under regulation 6 is more than the number of licences to be issued as assessed under regulation 4, the Commissioner may adopt seniority in experience as 'G' pass holder of such applicants as the criterion to give precedence to the applicants : Provided that if more than one applicant has the same period of experience, the applicant who is older in age shall get precedence. 9 Examination of the applicant - (1) The holder of a temporary licence in the case of an individual and the person or persons who will be actually engaged in the work of clearance of goods through cus....
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....3), Indian Explosives Act, 1884 (4 of 1884), Arms Act, 1959 (54 of 1959), Opium Act, 1879 (1 of 1878), Drugs and Cosmetics Act, 1940 (23 of 1940), Destructive Insects and Pests Act, 1914 (2 of 1914), Dangerous Drugs Act, 1930 (2 of 1930) in so far as they are relevant go the clearance of goods through customs; (p) procedure in the matter of refund of duty paid, appeals and revision petitions under the Act. (4) The Commissioner shall also satisfy himself whether the licensee in Form B (See Form 48 in para 5) if he is an individual, possesses, or in the case of a firm of company, the persons who will be actually engaged in the work relating to clearance of goods through customs on behalf of that firm or company, possess satisfactory knowledge of English and the local language of the Customs Station : Provided that in the case of persons deputed to work exclusively in the docks, knowledge of English will not be compulsory. Knowledge of Hindi will be considered as a additional or desirable qualification. (5) The holders of a regular licence under regulation 10 may authorise one of their employees or partners or directors, to appear for the examinat....
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....ea, there is also an international airport to handle imports by air even if under the jurisdiction of a different Commissioner. (3) The Commissioner may reject an application for the grant of regular licence to act as Custom House Agent if the holder of the temporary license fails to qualify in the examination in terms of Regulation 9, or the holder of temporary licence on evaluation of his performance in terms of Regulation 10 is not considered suitable due to any other reason to be stated in the order passed by the Commissioner." 7. Adverting to the facts of the case, the petitioner joined a Company, viz., M/s Mathurdas Narandas & Sons Forwarders Limited possessing a permanent Customs House Agent Licence in 1988 in Mumbai and later was transferred to Ahmedabad and power of attorney was granted in his favour on 6-6-1995. The petitioner thereafter appeared for the written examination prescribed under Regulation 9 of CHALR, 1984 and got qualified as per Customs Notice No. 1/99, dated 23-6-1999. He later on appeared for the oral examination and got qualified as per Customs Notice No. 2/1999, dated 20-10-999. Accordingly, the petitioner received certificate of success in t....
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....ation for a license to act as a Customs House Agent in a Customs Station shall be made [in the form of letter to the jurisdictional Commissioner of Customs, containing details as specified in Form A] and shall, inter alia, contain the name and the address of the person applying; and (2) If the applicant is a firm - (a) the name and address of every partner of the firm, the firm's name, and (b) the name of the partner or the duly authorized employee, who will actually be engaged in the clearance of goods or conveyances through the customs. (3) If the applicant is a company - (a) the name of each director, managing director, manager, and (b) the names of director, managing director, manager or the duly authorized employee, who will actually be engaged in the clearance of goods or conveyances through the customs. 6. Conditions to be fulfilled by the applicant. - The applicant referred to in clause (b) of sub-regulations (2) and (3) of regulation 5, as the case may be, or a person who has passed the examination referred to in regulation 8, shall prove to the satisfactio....
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....amination within two years of the related written examination irrespective of the number of chances, and if he fails do so, he shall be treated as having failed in the examination. (4) An applicant shall be allowed a maximum period of seven years within which he shall pass both the written and oral examinations. No further extension of time shall be granted. (5) Notwithstanding anything contained in sub-regulation (4), any person who holds a temporary licence granted under regulation 8 of the Customs House Agents Licensing Regulations, 1984, shall be allowed to pass the examination within a period of two years from the date of commencement of these regulations. (6) The examination may include questions on the following :- (a) preparation of various kinds of bills of entry and shipping bills; (b) arrival entry and clearance of vessels; (c) tariff classification and rates of duty; (d) determination of value for assessment; (e) conversion of currency; (f) nature and description of documents to be filed with variou....
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.... regulation 9 may authorize any one or more of their employees or partners or directors to appear for the examination referred to in sub-regulation (1) on behalf of such holders of license, in addition to the person of their agency who has passed the examination referred to in sub-regulation (1). 9. Grant of licence. - (1) The Commissioner of Customs shall on payment of a fee of Rs. 5,000/- grant a license in Form B to an applicant who has passed the examination referred to in regulation 8. (2) The Customs House Agents who are granted licences under sub-regulation (1) shall be eligible to work in all Customs Stations within the country subject to intimation in Form C to the Commissioner of Customs of the concerned Customs Station where he intends to transact business. No separate licence shall be required in places where in addition to a Customs House handling imports by sea, there is also an International airport to handle imports by air, even if under the jurisdiction of a different Commissioner of Customs. (3) The Commissioner of Customs may reject an application for the grant of licence to act as Customs House Agent if the applicant is [convicted of] fraud or ....
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....ation 8 of CHALR 2004 and be granted licence under regulation 9(1) of CHALR 2004 directly? No. Those who have not been granted licence under CHALR 1984 till 23-2-2004 lose their right. They have to meet the qualifications and pass the examinations under regulation 8 of CHALR 2004 11. On 31st October, 1997 (sic) the respondent No.1 issued a Circular on the issue of Customs House Agent Licence. It may be pertinent to refer to issue No. (ii) thereunder which reads thus : "[ii] Issue of CHA licenses to applicants who had passed the examinations under CHALR, 2004: 4. It has been represented to the Board that some of the Commissionerates have not invited applications for grant of CHA licenses, since the norms for issue of fresh license are required to be reviewed by the Board. Further, in cases where the applicants having passed the requisite examination under Regulation 8 of CHALR, 2004, have not been granted with a CHA license. Board had also examined these issues and decided that irrespective of the norms prescribed by the Board vide F.No. 502/5/92-Cus-VI dated 18-5-1994 under CHALR, 1984, concerned Commissioners of Customs shall issue CHA licenses to all those app....
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....n Exchange Management Act, 1999" 14. Thus, Regulation 2 of the (Amendment) Regulations, 2010 introduces a mandatory requirement for all successful candidates who had already passed the examination under CHALR, 1984, to again give examinations in the subjects stated therein, which were already mentioned in CHALR, 2004. The (Amendment) Regulations, therefore, contemplate a situation whereby the candidates successful under Regulation 9 of CHALR, 1984, are still required to appear in the examination of specific subjects as specified therein, while candidates successful in the exam conducted under CHALR, 2004 as well as the persons who had been granted licences under CHALR, 1984 are not required to go through the same. It is the categorical case of the petitioner that in the examinations conducted during the period between the introduction of CHALR, 2004 till the issuance of Notification No. 30/2010, dated 8-4-2010 amending CHALR, 2004 retrospectively, no questions had been asked from the newly introduced subjects in CHALR, 2004. 15. Subsequently another Circular being Circular No. 9 of 2010-Custom dated 8-4-2010 regarding issue of Customs House Agents Licence, came to be is....
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....assed candidates under the CHALR, 1984, the relaxation provided in respect of educational qualifications vide Boards Circular No. 48/2000-Customs shall be extended on similar basis." 16. Thereafter the Commissioner, Custom House, Ahmedabad issued a public notice being Public Notice No. 26/2010-CUSTOMS, dated 4th May, 2010 declaring examination under the newly introduced mandatory subjects for candidates qualified under regulation 9 of CHALR, 1984 which was to be held on 15th July, 2010. Being aggrieved, the petitioners have moved the present petitions seeking the reliefs noted hereinabove. 17. Mr. K.S. Nanavati, Senior Advocate, learned counsel for the petitioners invited attention to the provisions of Section 146 of the Customs Act, 1962 (the Act) to point out that sub-section(2) thereof empowers the Board to make regulations for the purpose of carrying out the provisions of the said section and that such regulations, inter alia, may provide the qualifications of persons who may apply for a licence and the qualifications of persons to be employed by a licensee to assist him in his work as an agent. It was submitted that Section 146 of the Act only empowers the Board to....
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....r. Provisions for imposition of general conditions of licence or conditions laying down the pre-qualifications therefor and/or the conditions/qualifications for grant or revocation of license, in absence of such a clear provision may be held to be laying down guidelines by necessary implication providing for conditions/qualifications for grant of licence also. 35. In the event a statute provides for licensing, in a case of this nature, the same must thus be found to satisfy the test oi reasonableness. The standard for determining reasonableness of a statute so as to satisfy the constitutional scheme as adumbrated in Article 14 of the Constitution of India must receive a higher level of scrutiny than an ordinary statute. Such a higher level of scrutiny is necessary not for the purpose of determining the constitutionality of the statute alone vis-a-vis the field of legislative power as envisaged under Article 245 of the Constitution of India but also having regard to the object and purpose, the statute seeks to achieve. 39. The superior courts would ensure that the subordinate legislation has been framed within the four corners of the Act and is otherwise valid. The issue....
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....r of a few and keeps really meritorious persons from engaging themselves in a profession, business or occupation of their choice. The right to enter such business also cannot be made dependent on the whims and caprice of an officer by leaving to his arbitrary decision whether or not to invite applications from persons interested in working as Customs House Agents or arbitrarily fixing the ceiling on the maximum number of Customs House Agents that may be issued licenses. It was submitted that arbitrariness of the regulations is amply clear from the fact that, in the Ahmedabad region, after 1996, the concerned Commissioner has not invited any applications and persons like the petitioners, having passed the examination in the year 1999 etc. and having requested the Jurisdictional Commissioner of Customs to grant a license, have still not been able to obtain licenses and with a change in the regulations are now being compelled to appear in the examinations for the newly added subjects. It was submitted that it is only on account of the failure on the part of the respondents to invite applications that despite having passed the examination under Regulation 9 of CHALR 1984 and having bee....
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....nt a license. The candidate, as contemplated under the preamble, is not required to reappear in a separate specific examination to reinstate the right at the stage at which it was already pending and had crystallized under CHALR, 1984, as by virtue of the preamble the crystallized right was already saved. 20. It was further submitted that despite having the ability to satisfy each and every criteria and condition as required of them under the Regulations, that of financial status, experience, proficiency, reliability and success in examination, the petitioners, by virtue of the provisions of CHALR 2004 as amended vide the (Amendment) Regulations, 2010, become ineligible for a license till clearance of the examination as contemplated in the (Amendment) Regulations, 2010 which illegally seeks to take away the pre-existing right bestowed under CHALR, 1984, which the petitioners had acquired. It was pointed out that although the petitioners are required to appear in a separate examination under the (Amendment) Regulations, 2010, the petitioners have been granted an identity card under Form "F" as per CHALR, 2004, whereas during the regime of the CHALR, 1984, the equivalent corres....
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....ses. The petitioners who have also passed the Regulation 9 examination and are working as Customs House Agents as authorised representatives of licensed Customs House Agents and licensed Customs House Agents fall in the same class. Thus the classification made and differential treatment meted out to the petitioners is therefore, violative of Article 14 and impose an unreasonable restriction on the fundamental rights of the petitioners under article 19(1)(g) of the Constitution. 23. It was, accordingly, submitted that, despite the fact that the petitioners are similarly situated to those persons who had acquired licenses under CHALR 1984, merely because of failure on the part of the concerned Commissioner to invite applications before the coming into force of CHALR, 2004, the petitioners are now sought to be discriminated against and are required to appear in an examination for additional subjects after having already cleared the qualifying examination several years ago. It was urged that considering the fact that even for the examination held under CHALR 2004, no question had been asked from the newly added subjects, it is apparent that the petitioners are sought to be discri....
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....der CHALR, 2004 unless they have actually passed the examination prescribed under CHALR, 2004. It was pointed out that based upon the decision of the Madras High Court, the Board decided to conduct written examination for those persons who had passed the Regulation 9 Examination under the earlier Regulations, that is, CHALR 1984 in respect of the following additional subjects : (a) The Patent Act, 1970 and Indian Copyright Act, 1957; (b) Central Excise Act, 1944; (c) Export promotion schemes; (d) Procedure on appeal and revision petition; (e) Prevention of Corruption Act, 1988; (f) Online filing of electronic Customs declarations; (g) Narcotic Drugs and Psychotropic Substances Act, 1985; (h) Foreign Exchange Management Act, 1999" 26. It was pointed out that the said subjects are covered under the syllabus prescribed for examination under regulation 8 of CHALR, 2004 and were not covered in the syllabus prescribed for examination under regulation 9 of CHALR, 1984. Thus, the decision of t....
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....wn that the Board may make regulations which may provide for the restrictions and conditions subject to which a license may be granted. That the Board, in exercise of the said power, has prescribed the restriction on the number of licenses for which Commissioner of Customs may invite applications as per his assessment of the requirement under Regulation 4. Further, the passing of examination under CHALR 1984 and satisfying the requirements of Regulations 5 and 6 of the CHALR, 2004, would not ipso facto entitle a person to grant of a license and the regulations provide for a condition that such persons can apply for a license only when applications for licenses have been invited by the Commissioner of Customs vide regulation 4. It was submitted that, thus, the above restrictions and conditions are not ultra vires Section 146 of the Act. 29. Next it was submitted that the provisions contained in Regulation 4 of CHALR, 1984 as well as Regulation 4 of CHALR, 2004, vest discretion in the Commissioner of Customs to invite applications for grant of such number of Customs House Agent licenses as assessed by him, to act as Customs House Agent. The petitioners are not being denied the ....
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....ents. That the Board is of the view that, ideally, no restriction should be placed on the number of Customs House Agents operating in the Customs Houses and the market forces should govern the number of proficient and qualified persons required to carry out the job of Customs House Agents commensurate with the volume of import/export cargo. The Board also has not found any justification in prescribing a turnover based criteria for ascertainment of the number of Customs House Agent licenses required to be issued at a particular Custom House/Station, inasmuch as the practice of undertaking Customs House Agent services on the basis of Form "C" intimation is already in vogue and would render such exercise meaningless. The Board, therefore, has decided against fixing a numeric criterion governing the number of Customs House Agent licenses being issued. Hence, there is no ceiling on the maximum number of Customs House Agents that can be licensed in terms of the Regulations or the instructions issued by the Board, which has been clarified vide paragraph 3 of Circular No. 09/2010, dated 8-4-2010. 31. It was further submitted that once the Board has vide CHALR, 2004, changed the eligi....
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....porary license before the applicant qualified at the prescribed examination and enables the holder of such temporary license to work on a par with the regular licensees who had got the license after passing the requisite examination. The issue involved in the said case, has no relevance to the controversy in issue in the present case, hence the said decision does not come to the aid of the respondents in any manner. Reliance was placed upon the decision of the Supreme Court in the case of Union of India v. International Trading Co. and another, (2003) 5 SCC 437 for the proposition that the doctrines of promissory estoppel and legitimate expectation cannot come in the way of public interest. Public interest has to prevail over private interest. 33. Reliance was placed upon the decision of the Maharashtra State Board of Secondary and Higher Secondary Education v. Paritosh Bhupeshkumar Sheth, (1984) 4 SCC 27, for the proposition that it is a common legislative practice that the Legislature may choose to lay down only the general policy and leave it to the delegate to make detailed provisions for carrying into effect the said policy and effectuate the purposes of the statute by f....
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....ons, that is, CHALR, 2004, came into force. That these two entities had cleared Regulation 9 examination under CHALR, 1984 and regular licenses were not issued to them during that regime. As per the information of the petitioner, the two entities were given licenses after CHALR, 2004 came into force while he as well as other similarly situated persons were sought to be denied the same right. 36. Having regard to the facts and circumstances of the case as well as the rival contentions advanced on behalf of the respective parties, the Court is of the view that it is possible to decide these petitions without entering into larger controversy as to whether the Board is empowered to prescribe for a qualifying examination for the grant of Customs House Agent's license, hence, the contentions raised in this regard are not dealt with, leaving it open to the parties to agitate the said issue in an appropriate case, if so required. 37. The controversy involved in the present case is, therefore, as to whether the action of the respondents in requiring the petitioners to appear in the additional subjects prescribed under CHALR, 2004 is arbitrary and discriminatory and as such, is v....
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....ho qualifies in an examination referred to in Regulation 9 and whose performance, is found to be satisfactory with reference to the conditions enumerated thereunder. Thus, under the Scheme of CHALR, 1984 initially upon receipt of an application to act as Customs House Agent, provision was made for grant of a temporary license upon satisfaction of the requirements of Regulations 5 and 6, and a holder of a temporary license was required to appear in the examination prescribed under Regulation 9 within the period prescribed thereunder. A holder of a temporary license, who qualified in an examination referred to in Regulation 9 and whose performance was found to be satisfactory with reference to the conditions stipulated in Regulation 10, could be granted a regular license in Form "D" by the Commissioner on receipt of an application in Form "C". 39. Under CHALR, 2004, Regulation 4 which is similarly worded to Regulation 4 of CHALR, 1984 provides for invitation of applications. Regulation 5 makes provision for application for license and is also similarly worded to Regulation 5 of CHALR, 1984. Regulation 6 of the CHALR, 2004 makes provision for conditions to be fulfilled by the ap....
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....004 lose their right and have to meet the qualifications and pass the examination under Regulation 8 of the CHALR 2004. Subsequently, by virtue of the (Amendment) Regulations 2010, under Regulation 8 of CHALR, 2004, sub-regulation (9) has been inserted, which provides that any person who had passed the examination conducted in Regulation 9 of the Customs House Agents Licensing Regulations, 1984, and has not yet been granted license under the said Regulations, upon declaring successful in a written examination conducted on the subjects specified thereunder, shall be deemed to have passed the examination referred to in Regulation 8 for the purpose of CHALR 2004. Pursuant to the said amendment in the Regulations, the Commissioner of Customs, Ahmedabad has issued Public Notice No. 26/2010-Customs calling upon the candidates who had already qualified under Regulation 9 of CHALR, 1984, but have not got Customs House Agent license to appear in the Customs House Agent examination in respect of additional subjects for the presently prescribed course curriculum under CHALR 2004. The examination was scheduled to be held on 15th July 2010. 42. The main grievance ventilated in the present....
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....d with the (Amendment) Regulations, 2010 and the clarification issued by the Board, requiring the petitioners to appear in examination of additional subjects for the qualifying to apply for a license under CHALR, 2004 are arbitrary and discriminatory so as to be violative of the petitioners' rights under Article 14 of the Constitution. 44. In the case of Union of India v. International Trading Co. and another (2003) 5 SCC 437, the Apex Court has held that while the discretion to change the policy in exercise of the executive power, when not trammeled by any statute is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was done arbitrarily or by any ulterior criteria. 45. It is a well settled principle of law that when a rule is challenged as denying equal protection, the question for determination by the court is not whether it has resulted in inequality but whether there is some difference which bears a just and reasonable relation to the object of the legislation. Mere differentiation or inequality of protection does not amount to discrimination within the inhibi....
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....ence and that its discriminations are based upon adequate grounds. The rule of classification is not a natural and logical corollary of the rule of equality, but the rule of differentiation is inherent in the concept of equality. Equality means parity of treatment under parity of conditions. Equality does not connote absolute equality. A classification in order to be constitutional must rest upon distinctions that are substantial and not merely illusory. The test is whether it has a reasonable basis free from artificiality and arbitrariness embracing all and omitting none naturally falling into that category. 47. Testing the facts of the present case on the anvil of the principles enunciated in the aforesaid decisions, the undisputed facts are that the petitioners herein have cleared the examination held under Regulation 9 of CHALR, 1984 and were otherwise qualified for grant of license under the said Regulations subject to scrutiny of certain conditions. The petitioners are also working in some capacity or the other, whether as director, partner, power or attorney, etc. of regular license holders. Thus, for all practical purposes the petitioners are holding qualifications eq....
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....eir clients properly. However, they can do this work more efficiently only if they are competent enough to do so. The explanation sought to be put forth on behalf of the respondents, however, fails to explain as to how the petitioners are in any manner differently situated than the regular license holders who had qualified under CHALR, 1984, so as to be any less competent than them. If those persons who had passed the Regulation 9 examination under CHALR, 1984 and obtained regular licenses at the relevant time possess the competence to act as regular license holders, one fails to understand as to how, in absence of any other distinguishing feature being pointed out, the petitioners who too have passed the Regulation 9 examination under CHALR, 1984 and have been discharging similar duties in different capacities on behalf of the regular license holders are any less qualified or lack the competence that the said license holders possess. On an overall consideration of the facts of the case, the State has neither been able to establish the reasonableness of the classification nor its nexus with the object sought to be achieved by the legislation. As to what is the basis and how is it r....
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.... was essential in case of all Customs House Agents and as such the same has a direct nexus to the object sought to be achieved, namely, that the Customs House Agents should be properly qualified. However, the explanation put forth by the respondents fails to explain as to how if the petitioners, because they have not passed examination in the additional subjects, are not competent and qualified to obtain licenses under CHALR 2004, the license holders who were already holding licenses prior to the new regulations coming into force are qualified to continue with such licenses. 50. In the case of the petitioners, though they are similarly situated to the license holders under CHALR 1984, except for the fact that they had not been granted licenses as the concerned Commissionerate had not invited applications, the petitioners are now sought to be saddled with the liability to appear in the examinations to be conducted in respect of additional subjects, whereas similarly situated license holders are not required to do so. If the case of the respondents is to be accepted, namely, that the requirement of the petitioners to appear in the additional subjects has a nexus with the object....
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.... govern the number of proficient and qualified persons required to carry out the job of Customs House Agent commensurate with the volume of import/export cargo. In the circular dated 31-10-2007, the Board has instructed the Commissionerates that irrespective of the norms prescribed by the Board under CHALR, 1984, the concerned Commissioners of Customs shall issue Customs House Agent license to all those applicants who had passed the Regulation 8 examination conducted under CHALR, 2004, subject to their fulfilment of the requisite conditions as mentioned in CHALR 2004. Thus, it is apparent that the respondents are blowing hot and cold at the same time. When it comes to dealing with the applications made by the petitioners despite the Commissioners not having invited applications, it has been contended on behalf of the respondents that in the light of the provisions of Regulation 4, licenses can be issued only as and when the concerned Commissioner invites applications in respect of the same even if the applicants may be qualified in all respects. Whereas, as regards the persons who have qualified under CHALR, 2004, despite the fact that Regulation 4 of the CHALR, 2004 also prescribe....