Ayurvedic Products Can’t Be Classified As Cosmetics Without Evidence; CESTAT Quashes 5.31 Crore Excise Demand

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has set aside excise duty demands exceeding Rs. 5.31 crore holding that the ayurvedic products cannot be classified as cosmetics without evidence. The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the onus is on the department to prove that the goods manufactured by the appellant-company are not Ayurvedic medicines but cosmetics / toiletry preparations, with documentary evidence. The dispute arose after officers of the DGCEI conducted searches at the company’s premises on 10 April 2012 based on intelligence that it was manufacturing Ayurvedic proprietary medicines, cosmetics, and toiletry preparations falling under Chapters 30 and 33 of the First Schedule to the Central Excise Tariff Act, 1985, without obtaining central excise registration and without payment of duty. Finished goods and private records were seized during the search. Statements of the Production Chemist and the Director were recorded, wherein it was stated that the products were manufactured under a valid drug licence issued by the Directorate of ISM Drug Control, Government of West Bengal, and were certified as “Ayurvedic Patent & Proprietary Medicines” under the Drugs and Cosmetics Act, 1940. A Show Cause Notice dated 3 January 2013 proposed classification of most products under Chapter 33 (cosmetics/toiletries), demand of central excise duty amounting to ₹4.54 crore (inclusive of cess), confiscation of seized goods, and imposition of penalties on the company and its Director. Subsequently, another notice dated 6 May 2014 demanded ₹76.41 lakh for a later period. Both demands were confirmed by the adjudicating authority along with interest, penalties, and redemption fine of ₹16 lakh for release of seized goods. The company argued that it was manufacturing Ayurvedic medicines strictly in accordance with formulas prescribed in authoritative Ayurvedic texts. The products were manufactured under a valid drug licence (AL-867-M dated 07.05.2008) and were renewed from time to time. A GMP certificate for manufacturing Ayurveda, Siddha, or Unani drugs had been obtained. The Directorate of ISM Drug Control, vide letter dated 28 August 2012, opined that the goods were “medicaments.” Test reports from the State Pharmacopoeial Laboratory confirmed the products were of standard Ayurvedic quality. Mere over-the-counter sale or absence of a prescription requirement does not convert a medicament into a cosmetic. The appellants further contended that the opinion of the Drug Control Authority was not relied upon in the Show Cause Notice, which, according to them, reflected mala fide intent. After examining the drug licence, GMP certificate, and the opinion of the Directorate of ISM Drugs Control, the Tribunal observed that the appellant was duly licensed to manufacture Ayurvedic medicines and had complied with statutory requirements under the Drugs and Cosmetics Act. The Bench noted that the Directorate’s letter clearly stated that the authority was empowered to grant licences for Ayurvedic, Siddha, or Unani products after scrutiny and recommendation by an expert committee. The Tribunal found that this opinion was neither disclosed nor relied upon in the Show Cause Notice, raising serious concerns about the approach of the department. The Tribunal held that the burden to prove classification under a particular tariff entry lies on the department. Mere over-the-counter sale does not mean a product is not a medicament. The percentage of medicinal ingredients is not determinative. The primary test is how the product is understood and used by consumers. Registration with the Drug Controller and manufacture under a drug licence are significant indicators. The Tribunal held that the Revenue failed to discharge its burden. No test reports or independent evidence were produced to establish that the products were cosmetics or toiletry preparations. The Tribunal categorically held the products were “Ayurvedic medicines” classifiable under Chapter 30. The Revenue failed to provide documentary or scientific evidence to support classification under Chapter 33. Consequently, the demands of duty, interest, penalties, and confiscation were unsustainable in law. The Tribunal set aside the excise duty demands totalling over ₹5.31 crore, interest liabilities, penalties imposed on the company and its Director, and confiscation and redemption fine relating to seized goods. Case Details Case Title: M/s. Glamour World Ayurvedic Company Pvt. Ltd. Versus Commissioner of Central Excise, Kolkata III Citation: JURISHOUR-179-CESTAT-2026(Kol) Case No.: Excise Appeal No. 76064 of 2014 Date: 27.02.2026 Counsel For Appellant: N. K. Chowdhury, Advocate Counsel For Respondent: S. K. Dikshit, Authorized Representative Click Here To Read Order Read More: Prior-Period CENVAT Credit Can’t Be Ground to Deny 70% Abatement Under Service Tax Notifications: CESTAT

Ayurvedic Products Can’t Be Classified As Cosmetics Without Evidence; CESTAT Quashes 5.31 Crore Excise Demand

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