Muchipara Consumers Co-Operative Stores Ltd Vs Commissioner of Customs (Appeals) (CESTAT Delhi)
The appellant participated in a Customs Department e-auction notified on 25.01.2017 and held on 07.02.2017 for sale of seized/confiscated cigarettes. As per auction terms, bidders had to deposit ₹25,000 as security. The highest bidder was required to deposit additional security within three days of auction closing, and the balance sale value along with applicable duties and taxes was payable within five days from issuance of the acceptance letter/sale order.
The appellant deposited ₹25,000 for participation, was declared the highest bidder, and received an intimation letter dated 07.02.2017 requiring deposit of ₹29,19,444 within three days. The appellant deposited this amount on 08.02.2017. Subsequently, the department requested the appellant to deposit the balance amount through a letter dated 14.03.2017. The appellant, via email dated 27.03.2017, pointed out that the department had not provided the testing report and requested information regarding the date of manufacture, stating that cigarette life is one year from manufacture. The acceptance letter was issued by the department on 28.03.2017.
On 29.03.2017, the CBEC issued Circular No. 9/2017-Cus on disposal of confiscated foreign origin cigarettes. The Circular stated that cigarette packets not complying with legal provisions (including COTPA and Packaging & Labelling Rules, and Legal Metrology requirements) should not be released for home consumption in the domestic market and should be destroyed.
The appellant thereafter informed that it would not be possible to lift the cigarette packets due to non-compliance with legal requirements and sought refund of the deposit by email dated 31.03.2017. The department did not refund the amount and, by letter dated 23.06.2017, informed the appellant that the deposit was forfeited as the appellant did not deposit the balance bid amount within five days from issuance of the acceptance letter.
The appellant also wrote on 17.04.2017 that the test report did not specify date of manufacture, and without it cigarettes could not be sold in the market as this would violate Rule 3 of the Cigarettes and other Tobacco Products (Packaging and Labelling) Rules, 2008. The appellant requested fresh testing to determine manufacture details or confirmation from the department, failing which refund was sought.
Pursuant to Delhi High Court’s order dated 14.07.2023 in a writ petition filed by the appellant, a refund application was filed on 02.08.2023. This refund application was rejected by the Assistant Commissioner (Refund) on 29.04.2024 on the ground that the amount stood forfeited due to failure to pay the balance within five days from acceptance letter issuance.
The appellant appealed to the Commissioner (Appeals), but the appeal was returned on the ground of lack of jurisdiction—first, because forfeiture was ordered by an equivalent rank Commissioner, and second, because the dispute was contractual in nature. The appellant challenged this before the Delhi High Court, which by order dated 16.09.2025 permitted the appellant, in the unique facts, to approach CESTAT to challenge both the refund rejection order dated 30.04.2024 and the Commissioner (Appeals) order dated 07.07.2025. CESTAT was directed to adjudicate whether forfeiture was in accordance with law.
Before CESTAT, the appellant argued that under the Circular dated 29.03.2017, non-compliant cigarette packets could not be released for home consumption and had to be destroyed; therefore, refund should be granted. The department argued the appeal was not maintainable since Section 27 of the Customs Act deals with refund of duty and interest, not earnest money, and that the auction was based on earlier instructions, not the 2017 Circular.
CESTAT noted Rule 3(1) of the 2008 Rules required, among other things, that every package must contain the date of manufacture. The appellant had repeatedly sought this information but it was not supplied. CESTAT found the department did not claim that the cigarette packets contained required declarations such as manufacturer/importer details and month/year of manufacture. CESTAT held that even though the auction notice was prior to 29.03.2017, the Circular applied since the goods had not been released to the appellant when the Circular came into force, and the Circular addressed difficulties in earlier instructions.
CESTAT also referred to an order dated 24.05.2018 passed by Assistant Commissioner of Customs, Kochi, in similar circumstances, where refund was granted after legal opinion that the auction proceedings were vitiated due to non-compliance with legal provisions. As that order had not been set aside, CESTAT held on parity that the appellant was entitled to refund.
CESTAT rejected the argument that it had no jurisdiction due to Section 27, stating the appeal was heard pursuant to Delhi High Court directions. It held forfeiture was not justified merely because balance payment was not made, since the goods could not legally be released and had to be destroyed. It directed refund of ₹25,000 and ₹29,19,444 with interest at 6% per annum from date of deposit till payment, and set aside the orders dated 29.04.2024 and 07.07.2025. The appeal was allowed on 17.12.2025.
FULL TEXT OF THE CESTAT DELHI ORDER
