CESTAT Chandigarh on Alleged Cigarette Smuggling and Customs Penalties

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 07.07.2026

CESTAT Chandigarh on Alleged Cigarette Smuggling and Customs Penalties

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chandigarh recently delivered a significant judgment in the case involving the alleged smuggling of prohibited cigarettes and the role of Shri Sanjay Choudhary. This article provides a detailed overview of the case, the legal arguments, and the final decision, offering insights into the complexities of customs law enforcement in India.

Background of the Case

• Incident: On 19 May 2021, customs officials at Ludhiana discovered a large quantity of undeclared, prohibited cigarettes concealed behind bags of dry dates in a consignment imported by M/s Shreyans Appearls & Leatherites.
• Seizure Details:
  • 120 cartons of ESSE brand (1,200,000 sticks)
  • 20 cartons of Benson & Hedges (200,000 sticks)
  • 110 cartons of Gudang Garam (1,584,000 sticks)
• Legal Context: Import of cigarettes is strictly regulated under the Cigarettes and Other Tobacco Products Act (COTPA, 2003) and related rules. The seized cigarettes lacked statutory warnings and were not declared in import documents, making them liable for confiscation under Section 111 of the Customs Act, 1962.

Allegations Against Sanjay Choudhary

The customs department alleged that Shri Sanjay Choudhary:

1. Assisted in procuring prohibited cigarettes.
2. Helped the main accused, Sh. Chander Shekhar, abscond by providing cash and promising to settle the case.
3. Was evasive during investigations and attempted to clear the consignment at the port.
4. Was linked to the booking of containers through his employee and had overlapping travel dates with Chander Shekhar in Dubai.
5. Tried to obstruct investigations by filing writ petitions.

Based on these allegations, a penalty of Rs. 55,00,000 was imposed on Choudhary under Sections 112(a)(i) and 114AA of the Customs Act.

Defense and Legal Arguments

Choudhary’s defense, as presented by his counsel, focused on the following points:

• The entire case against him was based solely on the statement of Chander Shekhar, which was not corroborated by any documentary or independent evidence.
• No financial transactions or partnership links between Choudhary and Chander Shekhar were established.
• The customs broker and other key witnesses did not implicate Choudhary in their statements.
• There was no evidence that Choudhary had any role in the import, clearance, or documentation of the prohibited goods.
• The penalties under Sections 112 and 114AA were not sustainable as Choudhary neither imported nor dealt with the goods, nor made any false declarations.

Tribunal’s Findings

The CESTAT bench, after reviewing all evidence and arguments, made the following key observations:

1. Lack of Corroborative Evidence: The only evidence against Choudhary was the statement of Chander Shekhar, which was not supported by any other witness or document.
2. No Direct Involvement: There was no proof that Choudhary was involved in the import, clearance, or handling of the smuggled cigarettes.
3. No Basis for Penalty: The requirements for imposing penalties under Sections 112(a)(i) and 114AA were not met, as Choudhary had not made any false declarations or directly dealt with the goods.
4. Commissioner (Appeals) Decision Upheld: The tribunal found no infirmity in the order of the Commissioner (Appeals), who had dropped the penalties against Choudhary.

Final Order

The CESTAT dismissed the appeal filed by the Revenue, upholding the order that exonerated Sanjay Choudhary from all penalties related to the alleged smuggling case. The cross-objection application was also disposed of accordingly.

Key Takeaways

• Importance of Corroborative Evidence: Mere statements without supporting evidence are insufficient for imposing penalties in customs cases.
• Due Process: The case highlights the necessity for thorough investigation and adherence to legal standards before penalizing individuals.
• Legal Precedent: This ruling reinforces the principle that penalties under customs law require clear, direct involvement and cannot be based solely on uncorroborated allegations.

This case serves as a crucial reference for importers, legal practitioners, and enforcement agencies dealing with customs law and the import of regulated goods in India.

Source: CESTAT Chandigarh

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