Cigarette Packs Lacking Mandatory Declarations Had to be Destroyed, Not Auctioned: CESTAT sets aside Forfeiture [Read Order]

Meta: Cigarette Packs Lacking Mandatory Declarations Had to be Destroyed, Not Auctioned: CESTAT Sets Aside Forfeiture

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the confiscated cigarette packets involved in the case could not have been put to auction at all because they did not meet the mandatory legal requirements, and such packets were required to be destroyed.

Muchipara Consumers Co‑operative Stores Ltd., the appellant, participated in an e‑auction held on 7 February 2017 for the sale of seized foreign‑origin cigarettes. They deposited the initial security amount of Rs. 25,000 and later paid Rs. 29,19,444 after being declared the highest bidder. The department issued an acceptance letter on 28 March 2017 asking the appellant to pay the remaining balance.

The appellant informed the department that the cigarette packets did not contain the legally required details, including the date of manufacture, which is mandatory under the Cigarettes and Other Tobacco Products (Packaging and Labelling) Rules, 2008. They argued that without these details, the cigarettes could not be sold in the domestic market.

They also referred to the CBEC Circular dated 29 March 2017, which directed that non‑compliant cigarette packets must not be released for home consumption and must be destroyed. The appellant requested a refund of the amounts already deposited.

The department refused the refund and forfeited the deposit on the ground that the appellant did not pay the remaining balance within five days of the acceptance letter. The Assistant Commissioner rejected the refund claim, and the Commissioner (Appeals) returned the appeal stating that he lacked jurisdiction. The appellant then approached the Delhi High Court, which permitted them to file an appeal before the CESTAT.

Before the tribunal, the appellant’s counsel argued that the cigarettes did not comply with the statutory requirements and could not legally be released. They also pointed out that in a similar case involving Ahad Traders, the department had refunded the bid amount when the cigarette packets were found to be non‑compliant.

The revenue counsel argued that the appellant failed to pay the balance amount within the prescribed time and that the forfeiture was valid. They also argued that Section 27 of the Customs Act deals only with refund of duty or interest, not auction deposits.

The two‑member bench comprising Justice DilipGupta (President) and Hemambika R. Priya (Technical Member) observed that the cigarette packets lacked essential statutory declarations, including the name and address of the manufacturer and the date of manufacture. The tribunal explained that under the CBEC Circular dated 29 March 2017, such non‑compliant cigarette packets could not be released into the domestic market and had to be destroyed. Since the goods were never handed over to the appellant, the circular applied fully.

The tribunal pointed out that the department itself had refunded the bid amount in the Ahad Traders case under similar circumstances. It further observed that the appellant had repeatedly asked for a refund because the goods could not legally be sold, yet the department retained the money.

The tribunal concluded that the forfeiture of the appellant’s deposit was unjustified because the goods were not fit for auction in the first place. The tribunal set aside the orders of the Assistant Commissioner and the Commissioner (Appeals) and directed the department to refund the entire amount deposited by the appellant, along with interest at 6% per annum from the date of deposit until payment.

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