Cigarette Packets Can’t Be Auctioned But Should Be Destroyed: CESTAT Orders Customs to Refund Auction Money With Interest

The Delhi bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has directed the Customs Department to refund the entire amount deposited by an auction bidder for confiscated cigarettes, along with 6% annual interest, holding that the forfeiture of the deposit was unlawful as the goods themselves could not have been legally sold in the domestic market and should have been destroyed. The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has set aside orders passed by the Assistant Commissioner (Refund) and the Commissioner (Appeals), concluding that the auction of the seized cigarettes was fundamentally flawed due to non-compliance with mandatory statutory requirements governing the sale of tobacco products. The case arose from an e-auction conducted by the Customs Department in February 2017 for the sale of seized and confiscated cigarettes of foreign origin. The bidder deposited an initial security amount to participate in the auction and, after being declared the highest bidder, deposited a substantial further sum as required under the auction terms. However, before the balance amount could be paid and the goods lifted, the bidder raised concerns regarding the legality of selling the cigarettes in India. The bidder sought critical information, including the date of manufacture of the cigarettes, pointing out that under the Cigarettes and Other Tobacco Products (Packaging and Labelling) Rules, 2008, such details are mandatory for sale in the domestic market. The bidder also highlighted that cigarettes typically have a limited shelf life. On March 29, 2017, the Central Board of Excise and Customs (now CBIC) issued a circular clarifying the procedure for disposal of confiscated cigarettes. The circular categorically stated that cigarette packets that do not comply with the requirements of tobacco control laws, packaging and labelling rules, and legal metrology provisions cannot be released for home consumption and must instead be destroyed. Relying on this circular, the bidder informed Customs that it would not be possible to lift the goods as they were not legally saleable and sought a refund of the amounts already deposited. The Department, however, refused the refund and instead forfeited the deposit on the ground that the bidder had failed to pay the remaining auction amount within the stipulated time. The bidder challenged the forfeiture through multiple legal forums. While the refund application was rejected by the Assistant Commissioner, the Commissioner (Appeals) declined to examine the matter, citing lack of jurisdiction and terming the dispute as contractual in nature. This led to intervention by the Delhi High Court, which permitted the bidder to approach CESTAT and directed the Tribunal to decide the matter comprehensively on merits. After examining the facts and the applicable legal framework, CESTAT held that the cigarettes auctioned by Customs did not meet mandatory statutory requirements, including disclosure of manufacturing details, as prescribed under tobacco control and legal metrology laws. The Tribunal noted that once the CBIC circular came into force and the goods had not yet been released, the Department was legally barred from selling such non-compliant cigarettes in the domestic market. The Tribunal rejected the Department’s argument that the circular was inapplicable because the auction notice had been issued earlier, observing that the circular merely clarified existing legal obligations and addressed practical difficulties in implementing earlier instructions. It further noted that in similar circumstances, Customs authorities had refunded auction amounts to other bidders, reinforcing the principle of parity. The Tribunal also dismissed the contention that it lacked jurisdiction to order a refund, pointing out that it was acting pursuant to explicit directions of the Delhi High Court. Holding the forfeiture to be arbitrary and unsustainable, CESTAT directed the Customs Department to refund the entire amount deposited by the bidder for participating in the auction, including the security deposit, along with interest at the rate of 6% per annum from the date of deposit until actual payment. The Tribunal observed that since the cigarettes could not have been lawfully auctioned or released for home consumption and should have been destroyed, the Department had no justification for retaining the bidder’s money for several years. Case Details Case Title: M/s Muchipara Consumers Co-Operative Stores Ltd Versus Commissioner of Customs (Appeals) Case No.: Customs Appeal No. 51577 of 2025 Date: 17/12/2025 Counsel For Appellant: S. Sunil, Advocate Counsel For Respondent: Nikhil Mohan Goyal, Authorised Representative Click Here To Read Order Read More: CBI Arrests CGST Superintendent and Inspector While Allegedly Accepting Rs. 4 Lakh Bribe in Jabalpur

Cigarette Packets Can’t Be Auctioned But Should Be Destroyed: CESTAT Orders Customs to Refund Auction Money With Interest

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