Court Upholds Cancellation of DEPB Scheme, Penalties Due to Fraudulent Bank Certificates by Petitioners.

The HC dismissed the writ petitions challenging the cancellation of the DEPB Scheme and the penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992. The court held that the petitioners engaged in fraud by using forged bank certificates to obtain DEPB benefits, justifying the cancellation and penalties. The court rejected claims of discrimination and emphasized that fraud nullifies legal acts, thus supporting the respondents' actions. The court concluded that the petitioners' arguments lacked merit and upheld the orders of the Additional Director General of Foreign Trade, affirming the legality of the penalties imposed.

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Issues:
Challenge to order cancelling DEPB Scheme and levying penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992.

Analysis:
The judgment pertains to two writ petitions challenging the order of the Additional Director General of Foreign Trade cancelling the Duty Exemption Pass Book (DEPB) Scheme ab initio and imposing a penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992. The DEPB scheme is a license to import material without paying customs duty, granted against exports. The petitioners had obtained DEPB based on forged bank certificates of export and realization. The respondents issued show cause notices and subsequently cancelled the DEPB and imposed a penalty. The petitioners contended that similar concerns were not penalized, and the provisions of Section 11(2) were not applicable as no violation occurred. The court rejected the petitioners' arguments, emphasizing that fraud avoids all judicial acts. The court cited legal precedents to establish that deliberate deception for unfair advantage constitutes fraud. The court held that the petitioners, as ultimate beneficiaries, were aware of the forged certificates, indicating fraudulent intent.

The court addressed the cancellation of the DEPB, stating that the power to cancel a license includes both utilized and unutilized licenses. Despite the severe consequences of cancellation, in cases like this where the claim was based on a forged document, cancellation was deemed appropriate. The court emphasized that no equity favored the petitioners in this situation. Regarding the applicability of Section 11(2) of the Act, the court analyzed the provisions relating to imports and exports, concluding that duty-free imports made fraudulently contravened the Act, justifying the penalties imposed. The court dismissed the plea of discrimination, stating that illegality cannot be the basis for a complaint of discrimination. Upholding the orders, the court dismissed both petitions, finding them devoid of merit.

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