2005 (12) TMI 107 - HC - Customs

EXIM - DEPB Scheme - fabricated documents - Penalty - applicability of the provision of section 11(2) - HELD THAT - In the instant case, the stand of the respondents in the written statement is that the imports made by the petitioners were cleared without payment of customs duty on the basis of duty credit allowed in the DEPBs issued under the Act, which were obtained on the basis of forged bank realisation certificates. This factual averment has not been controverted by the petitioners. In the light of this factual scenario, reading the provisions of the said two Statutes conjointly. Section 11(2) of the Act would be clearly attracted. We are of the considered view that duty free imports made by the petitioners on the basis of DEPBs', fraudulently obtained, is tantamount to contravention of the provisions as engrafted in Section 11 of the Act and thus, no fault can be found with the orders levying penalties under the said Section. Insofar as the main challenge on the ground of discrimination is concerned, it would suffice to say that the plea of discrimination is never available in an act of illegality. An illegal order cannot constitute the basis for a legitimate complaint of discrimination. Thus, an illegal or unwarranted order cannot be made the basis of issuing a writ compelling an authority to repeat that illegality or to pass another unwarranted order. The extraordinary and discretionary power of the High Court cannot be exercised for such a purpose. Giving effect to such pleas would be prejudicial to the interests of law and will do incalculable mischief to public interest. It will be a negation of law and the rule of law. Hence, we reject the contention. Thus, both the petitions, being devoid of any merit, are dismissed accordingly.

Summary

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.