The main legal point established in the judgment is that fraudulent claims for benefits under the DEPB scheme can lead to the cancellation of the benefits and the imposition of penalties under Section 11(2) of the Act.

D.K.Jain, J.

1. Challenge in these two writ petitions is to the order passed by the Additional Director General of Foreign Trade, whereby he has upheld the order passed by the Assistant Director General of Foreign Trade, cancelling the Duty Exemption Pass Book, commonly known as DEPB Scheme, ab initio and levying penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 (for short, #24;the Act#25;).

2. Since the basic ground, on which the said action was taken against both the petitioners is identical, for the sake of convenience, both the petitions are being disposed of by this common order. However, for the sake of ready reference. Extracts of C.W.P. No. 15278 of 2004 are taken as illustrative. These are as follows :

3. With a view to boost exports, the Government of India announces various incentives, which include exemption from payment of central excise duty, customs duty etc. and formulation of various schemes under the import and Export Policy, known as EXIM policy. The said policy is declared under Section 5 of the Act. It is declared for a period of five years, though amendments therein are carried out from time to time. DEPB scheme is one of such schemes framed under the EXIM policy. It is in the nature of a licence to import material without payment of customs duty and is in the form of a pass book. The licence is granted against exports. A fixed percentage of value of exports made is credited in the DEPB pass book and is accounted for against the imports.

4. Under the Handbook of Procedures, issued in terms of the EXIM policy, an application for obtaining DEPB is made to the Joint Director General of Foreign Trade, respondent No. 1 herein. The application has to be in the prescribed form, accompanied by various documents, including a bank certificate of exports and realisation of the export proceeds. As per the procedure laid down in paragraph 7.38 of the Handbook of Procedure 1997-2002, DEPB can be applied for even before realisation of export proceeds, but if the export proceeds are not realised within 6 months or within the extended period, the DEPB holder is liable to pay an amount equal to DEPB availed along with interest at the rate of 24% from the date of issue of DEPB till the date of deposit.

5. The petitioner claims to have exported goods on 15-7-1999 through Customs Freight Station, Ludhiana. It claims to have approached respondent No. 1 for issue of DEPB on the basis of export documents through an Assistant of the Chartered Accountant. On the basis of the documents, so furnished on behalf of the petitioner, a DEPB pass book was issued on 2-9-1999 for the value of Rs. 2,79,436/-. Admittedly, the export proceeds were realised on 6-9-1999.

6. On the basis of some information received by respondent No. 1 to the effect that some exporters had obtained DEPB on the basis of forged bank certificates of Export and Realisation, on 11-6-2001, two show cause notices under Section 14 for action under Sections 9(4) and 11(2) of the Act, were issued to the petitioner, inter alia , pointing out that their bankers had stated that they have not issued bank realisation certificate produced by them at the time of issuance of DEPB. The petitioner was, thus, called upon to show cause as to why penalty under Section 11(2) of the Act should not be imposed upon it and the DEPB licence should not be cancelled ab initio .

7. In reply to the show cause notices, the petitioner stated that payment for the material exported had actually been realised through proper banking channel and if any forged bank realisation certificate had been filed with respondent No. 1, it had been done by an Assistant of the Chartered Accountant, without their knowledge.

8. Finding the explanation, so furnished, to be unsatisfactory, respondent No. 1, in exercise of powers vested in him under Section 9(4) of the Act read with Rule 10(a) of the Foreign Trade (Regulation) Rules, 1993, cancelled the DEPB ab initio and fu