CESTAT mandates refund with interest due to non-compliance of auctioned foreign cigarettes with statutory regulations.
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) based in New Delhi has ordered the refund of deposits made by M/s Muchipara Consumers Co-Operative Stores Ltd in an e-auction for confiscated cigarettes of foreign origin. The Tribunal, presided over by Mr. Justice Dilip Gupta and Ms. Hemambika R. Priya, ruled in favor of the appellant, highlighting statutory non-compliance of the auctioned goods.
The appeal arose from a series of events beginning with an e-auction notification by the Customs Department on January 25, 2017. M/s Muchipara Consumers Co-Operative Stores Ltd, the highest bidder, deposited a total of Rs. 29,44,444 after winning the bid. However, the auctioned cigarette packets failed to comply with the Cigarettes and Other Tobacco Products (Packaging and Labelling) Rules, 2008, due to the absence of manufacture dates and health warnings.
Complicating the matter, a Circular dated March 29, 2017, issued by the Central Board of Excise and Customs, mandated that non-compliant cigarette packages should not be released for domestic consumption and must be destroyed. Despite this, the department initially refused the refund, claiming the appellant failed to deposit the remaining balance promptly.
The Delhi High Court intervened, directing CESTAT to adjudicate the matter. In its decision dated December 17, 2025, the Tribunal set aside previous orders by the Assistant Commissioner and Commissioner (Appeals), citing the need for strict compliance with statutory packaging and labeling regulations. It emphasized that the cigarettes in question must be destroyed as per the 2017 Circular, thus entitling the appellant to a refund.
Furthermore, the Tribunal ordered the Customs Department to refund the deposited amount with an interest rate of 6% per annum from the date of deposit until payment. This decision aligns with previous similar cases, reinforcing the necessity for adherence to packaging regulations to protect consumer rights and public health.
The Tribunal's ruling underscores the importance of compliance with statutory provisions for goods subject to customs auction. It serves as a reminder to authorities about their obligations to ensure all auctioned goods meet legal standards before sale. This case marks a significant precedent in the realm of customs auctions, emphasizing consumer protection and regulatory compliance.
Bottom Line:
Refund of e-auction deposit permissible when confiscated cigarettes of foreign origin do not comply with statutory requirements for sale and must be destroyed.
Statutory provision(s): Customs Act, 1962 Section 27, Circular No. 9/2017-Cus., Cigarettes and Other Tobacco Products (Packaging and Labelling) Rules, 2008, Legal Metrology Act, 2009, Legal Metrology (Packaged Commodities) Rules, 2011.
