Keith Withington was arrested after an operation carried out by HMRC officers who kept him under surveillance and detained him at a Gainsborough pub.
Stephen Kemp, prosecuting, said that HMRC officers watched as Withington entered the White Horse carrying a bag.
Mr Kemp said: “The bag was searched and found to contain a supply of cigarettes and hand rolling tobacco which had not had the UK duty paid on them.”
Withington had £3,700 cash on him and more cash was found during a search of his home in Bawtry along with further supplies of illegal cigarettes and tobacco.
Mr Kemp said: “In total the Revenue officers seized 1,860 cigarettes and 42.5 kgs of hand rolling tobacco together with £7,775 cash. The total amount of duty evaded on the cigarettes and tobacco was £8,173.”
Withington went on to admit he had been selling the illegal cigarettes. He claimed to have bought them from a man he knew only as “John” whom he met in Grimsby.
Withington, 63, of Sterling Avenue, Bawtry, admitted a charge of possessing criminal property on 18 November 2014 and two charges of being concerned with goods in an attempt to avoid duty.
He was given an 18 week jail sentence suspended for 12 months and ordered to complete 180 hours of unpaid work.
Withington also had £8,173 of assets confiscated as the proceeds of crime and the cigarettes and tobacco found were also confiscated.
Sarah-Kate McIntyre, defending, said her client admitted the offences at the earliest opportunity and had co-operated fully with the authorities.
She told the court “It was for financial gain.”
“He is not in receipt of a pension. He saw this as a better way of earning money than claiming benefits.”
Miss McIntyre said Withington cares for his long-term partner who is on invalidity benefit and relies on him.