Customs | Confiscated Cigarettes Not Fit For Home Consumption Cannot Be Auctioned; Security Deposit Refundable: CESTAT New Delhi

Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) stated that the auction notice may have required the assessee to perform certain acts but when the mandatory condition specified in the Rules and the Circular are not satisfied on the cigarettes packets that have been confiscated, the cigarette packets cannot be released in favour of the assessee and have to be destroyed.

In the case at hand, the assessee/appellant participated in an e-auction for sale of seized/confiscated cigarettes by the Customs Department.

The terms and conditions for participation required the bidder to deposit Rs. 25,000/- before auction as security deposit. The highest bidder was also required to deposit a further security deposit within three days from the date of closing of the e-auction.

The balance amount of the sale value with duties and taxes was also required to be paid within five days from the date of issuance of the acceptance letter/sale order.

The assessee had deposited Rs. 25,000/- for participating in the auction. The assessee was declared the highest bidder and the remaining amount was also deposited by the assessee. Thereafter, the department requested the assessee to deposit the balance amount.

The assessee wrote a letter that it would not be possible for the assessee to lift the cigarette packets as they did not comply with the provisions of laws and requested for refund of deposit made by the assessee.

The assessee pointed out that the test report did not give the date of manufacture and cigarettes cannot be sold in the market without the manufacture date as that would be in violation of rule 3 of the Cigarettes and other Tobacco Products (Packaging and Labelling) Rules, 2008.

The assessee filed a refund application before the appropriate authority which was rejected for the reason that the amount stands forfeited as the assessee had failed to deposit the balance amount of bid within five days from the date of issuance of the acceptance letter.

The counsel for the assessee submitted that the assessee would be entitled to interest on the amount deposited by the assessee towards the e-auction. This amount could not have been retained by the department and should have been refunded since the cigarette packets could not have been put to e-auction and should have been destroyed.

The bench referred to the CBIC Circular No. 9/2017-Cus., dated 29-3-2017, which provides that the cigarette packets shall have the name and address of the manufacturer of packer or importer and the month and year in which the commodities manufactured or pre-packed. Such cigarettes can be disposed of by sale or by e-auction but cigarette packets which do not comply with the aforesaid provisions should not be released for home consumption in the domestic market and should be destroyed.

The Tribunal disagreed with the department that the Circular dated 29.03.2017 would not be applicable in the case because the auction was conducted prior to 29.03.2017.

The bench stated that the cigarette packets could not have been put to auction and should have been destroyed. The assessee right from the beginning had been asking the department to refund the amount but that was not done. The assessee would, therefore, be entitled to claim interest on the amount deposited by the assessee towards the e-auction.

In view of the above, the Tribunal allowed the appeal and directed the department to refund the amount deposited by the assessee in the e-auction with interest rate of 6% per annum from the date of deposit till the date of payment.

Case Title: M/s Muchipara Consumers Co-Operative Stores Ltd. v. Commissioner of Customs (Appeals)

Case Number: Customs Appeal No. 51577 of 2025

Counsel for Appellant/ Assessee: S. Sunil

Counsel for Respondent/ Department: Nikhil Mohan Goyal

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