Mandatory cigarette labelling rules blocked domestic release, and auction deposits were refundable with interest when release became unlawful.

Confiscated cigarette packets that did not satisfy the mandatory packaging and labelling requirements under the Cigarettes and Other Tobacco Products (Packaging and Labelling) Rules, 2008 could not be released for domestic sale after the 29.03.2017 circular, which required non-compliant cigarettes to be destroyed. Because the goods were incapable of lawful release, the successful bidder's failure to pay the balance auction amount did not justify forfeiture of sums already deposited. The retained auction amounts were held refundable, and interest was payable at 6% per annum, with the department directed to refund the deposits.

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Issues: (i) Whether the seized/confiscated cigarette packets, not complying with the packaging and labelling requirements, could be released for domestic sale after the circular dated 29.03.2017 came into force; (ii) whether the amounts deposited by the successful bidder towards the e-auction could be forfeited, or were refundable with interest.

Issue (i): Whether the seized/confiscated cigarette packets, not complying with the packaging and labelling requirements, could be released for domestic sale after the circular dated 29.03.2017 came into force.

Analysis: Rule 3(1) of the Cigarettes and other Tobacco Products (Packaging and Labelling) Rules, 2008 required each cigarette package to bear the prescribed particulars, including the date of manufacture. The circular dated 29.03.2017 reiterated that cigarettes not complying with the applicable statutory requirements should not be released for home consumption and should be destroyed. Since the goods had not been released when the circular came into force, and the mandatory particulars were not shown to be present, the goods could not lawfully be delivered for retail sale.

Conclusion: The cigarette packets were not releasable for domestic consumption and were liable to be destroyed.

Issue (ii): Whether the amounts deposited by the successful bidder towards the e-auction could be forfeited, or were refundable with interest.

Analysis: Once the goods could not legally be released, the bidder's failure to deposit the balance bid amount did not justify forfeiture of the amounts already paid. The earlier refund order in a similar matter supported the same treatment. The Tribunal also rejected the objection based on section 27 of the Customs Act, 1962, and held that the deposited sums retained toward the auction could not be withheld after the goods became incapable of lawful release. Interest was also warranted because the department had retained the money despite the bidder's repeated requests for refund.

Conclusion: The forfeiture was unsustainable and the deposited amounts were refundable with interest at 6% per annum.

Final Conclusion: The impugned orders were set aside and the department was directed to refund the auction deposits with interest, thereby granting relief to the bidder.

Ratio Decidendi: Where confiscated cigarettes do not satisfy the mandatory packaging and labelling requirements and cannot lawfully be released for domestic consumption, a bidder's default in paying the balance auction amount does not justify forfeiture of the amounts already deposited, and refund with interest may follow.

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