Whats the news?
Dabur Hajmola faces GST show cause notice over the dispute on whether the product is candy or ayurvedic medicine.
Who issued notice and on whom?
The show cause notice is issued by DGGI(Directorate General of GST intelligence)'s Coimbatore zone and issued against Dabur India Limited.
Notice details
Show cause notice is issued with respect to one of Dabur's products "Hajmola" by DGGI Coimbatore Zone on an issue involving dispute in classification of Hajmola as to whether it is an ayurvedic preperation or as candy. Dabur maintains that the product remains an Ayurvedic medicine, citing the earlier rulings. It is pertinent to note that there is already demand order for Rs. 320 Crores issued in November 2024 by CGST Commissionerate, Chandigarh following investigations wrt alleged short payment of GST linked to classification of the same product Hajmola. Dabur received the initial notice in Oct 2023 and Final order confirmed the ₹320.6 crore demand. Dabur has challenged the order citing past favorable rulings.
Why is it relevant?
If the classification is normal candy, GST rate applicable is 18%, while for Ayurvedic preparation it is 12%.
Any precedence in this matter?
In pre-GST regime as well, Dabur faced classification disputes and legal cases filed by various government authorties across various jurisdictions primarily concerning whether Hajmola should be taxed as an Ayurvedic medicine or a confectionery item. Dabur consistently argued that Hajmola is an Ayurvedic formulation, manufactured under a drug license and listed under the Drugs and Cosmetics Act, 1940. Courts inlcuding supreme court and tribunals ruled in Dabur’s favor, reinforcing its classification as an Ayurvedic medicine. Few of those cases and rulings are summarised below:
- In 1994 – CEGAT (presently known as CESTAT) ruling in the case Dabur India Ltd. vs Collector of Central Excise on dispute on classification as to whether Hajmola is a medicament or sugar confectionary. The tribunal ruled that Hajmola Candy should be classified under Chapter 30, sub-heading 3003.30 of the Central Excise Tariff Act as an Ayurvedic medicine, not under Chapter 17, sub-heading 1704.90 as sugar confectionery. The court noted that although the product contains 75% sugar, its active ingredients are Ayurvedic and it is manufactured under a drug license.
- In 2002 –The Supreme Court upheld the CEGAT ruling by dismissing an appeal from the Commissioner of Central Excise, Chandigarh against the 1994 ruling, reinforcing that Hajmola Tablets are Ayurvedic medicines.
- 2016 – Allahabad High Court Judgment: In 2016, Uttar Pradesh commercial tax department appealed against order of Commercial Tax Tribunal, UP that classified Hajmola, Hajmola Candy, and Chyawanprash as medicines for tax purposes. . The court sided with tribunal and It emphasized that these products are manufactured under licenses issued by the Ayurvedic and Unani Services under the Drugs and Cosmetics Act, 1940, and that the place of sale (e.g., general stores vs. pharmacies) is irrelevant to their classification.
- M/s. Dabur India Ltd. vs State of Orissa (2021): Judgement addressed petitions filed by Dabur in 1994-99 against the reassessment orders issued by the Sales Tax Officer under Orissa Sales Tax Act. The STO reclassified the product as a residual item taxable at 12%, raising a cumulative demand of over ₹34 lakh across the four years. The High Court consolidated all four petitions and ruled in Dabur’s favor. Court held that Hajmola Candy qualifies as an Ayurvedic medicine, citing its manufacture under a valid Ayurvedic drug license and its intended therapeutic use.