The Justice Department without explanation has dropped conspiracy and fraud charges 11 days into a trial against four New England college officials accused of scheming illegally to bring Iranian students to the U.S.

The chief federal prosecutor in the case, Guy L. Goodwin of the criminal division, said in court that he had been ordered by the Justice Department to close the case and that the decision was made without consideration of the merits of the case. Goodwin has refused further comment.

The decision, which has infuriated some Justice Department lawyers and baffled defense lawyers in the case, came Tuesday in federal district court in Scranton, Pa., where at least 30 witnesses had been flown in at government expense to testify, two from as far away as Egypt and India. Sources said the investigation of the case had taken three years.

Peter Loftus, one of the defense attorneys, said he was astounded by the decision. He estimated that the government spent "more than a million dollars on the case . . . . It's not the most asinine action I've ever seen the government take, but it comes close."

Loftus said that government attorneys, in an abrupt announcement, said the four defendants would be given a "pretrial diversion," a special discretionary procedure under which a defendant who is not charged with a violent crime and has no criminal past can be released before trial and put into a community program.

But within minutes, the charges were dropped altogether. "It was the shortest pretrial diversion I've ever seen, not even five minutes," Loftus said. "For five minutes I could stand on my head and whistle Dixie."

Justice Department sources said the order came from the office of Associate Attorney General Rudolph W. Giuliani and followed a controversial decision to drop a similar case in Mississippi. Justice officials refused to discuss the Mississippi case or to give any reason for dropping the Scranton case.

Giuliani, however, denied that he made the decision. "I had absolutely nothing to do with it. I didn't direct it, authorize it or know about it in advance," he said. "The decision was made in the criminal division."

Sources in the criminal division say they were informed the decision was made by Giuliani.

Officials said the Mississippi case involved Richard Dodder, an administrator at the English Language Institute of the University of Southern Mississippi in Hattiesburg. Justice Department investigators were looking into allegations of possible visa fraud there, sources said.

Department employes said the criminal division wanted to proceed against Dodder on a felony charge, but were resisted by U.S. Attorney George Phillips of the southern district of Mississippi, who favored a misdemeanor charge.

"It turned into a personal battle between the criminal division and George Phillips," said one Justice source. "There was a lot of yelling, screaming and stepping on people."

That battle culminated two to three weeks ago in a meeting at Justice in which Phillips was on one side and personnel from the criminal division and the Immigration and Naturalization Service on the other. Giuliani eventually sided with Phillips, he said, on grounds that the U.S. attorney could spend his time on more serious crime, and the decision was made last weekend to allow a pretrial diversion for Dodder.

Sources said that a Justice Department statement about Dodder's alleged involvement in the scheme has been filed and is under seal in federal court. An official said the information will be held for a time and then expunged with no charges filed against Dodder if there is no subsequent conduct called into question.

Dodder, reached by telephone at his university office, refused comment.

Phillips, who graduated from the University of Southern Mississippi and also practiced law in Hattiesburg for six years until he was appointed U.S. attorney in 1980, said, "I cannot comment. I cannot even confirm or deny the existence of such a case."

Sources at the Justice Department say the decision in the Mississippi case created a precedent that forced the dropping of the case in Scranton.

The Scranton case involved four school administrators: Gus Turbeville, formerly president of Emerson College in Boston at the time of the alleged violations and now president of William Penn College in Oskaloosa, Iowa; Darcy Coyle, former president of Nichols College in Dudley, Mass., now president of Upper Iowa University of Fayette; Charles Avery, president of the Shaw International Student Center in Boston, and John Bove, who was admissions director at the now-defunct Ricker College in Houlton, Maine.

In a 26-count indictment issued in July, 1981, the four were charged along with Peter Galonis, who was alleged to be the recruiter, of signing hundreds of blank immigration forms which Galonis was then accused of taking overseas and selling, largely to Iranian students, in 1976. The charges against them included conspiracy to defraud the United States, aiding and abetting a false statement to a government agency and mail fraud.

The indictment alleged that Galonis sold the documents, for up to $500 each, to students who were then able to obtain visas from the U.S. Embassy.

On Wednesday Galonis entered a plea bargain in which he pleaded guilty to charges of conspiracy, mail fraud, making false statements and the use of false certificates. His sentencing has been set for Dec. 17.

Lawyers for the four college officials have criticized the handling of the case by the Justice Department.

"It's been a tremendous interruption in the defendants' lives," said Philadelphia attorney Walter Phillips, of the 16 months since the indictments were made public. "I think it's unfair the Justice Department did not see fit to dismiss the indictment a year and a half ago so these men would not have to go through this ordeal."