Re-Look Into Composition, Usage, Product Patent, Similarity Of Sun Pharma's Muscle Relaxants For DTA Sales Entitlement: CESTAT Ahmedabad
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), in a matter involving similarity of Muscle Relaxant sold domestically vis-à-vis exported by a Pharma major and benefit concessional duty thereof, has remanded back to the Adjudicating Authority for fresh consideration. Sun Pharmaceuticals Industries Limited, cleared/sold multiple products...
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), in a matter involving similarity of Muscle Relaxant sold domestically vis-à-vis exported by a Pharma major and benefit concessional duty thereof, has remanded back to the Adjudicating Authority for fresh consideration.
Sun Pharmaceuticals Industries Limited, cleared/sold multiple products in Domestic Tariff Area (DTA) at concessional rate of duty in terms of Notification No. 23/2003-CE dated March 31,2003. As an Export Oriented Unit (EOU) can clear goods in DTA upto 50% of Free-On-Board (FOB) value of their physical exports i.e. a post-export entitlement.
Foreign Trade Policy restricts Domestic sale of any specific product to less than or equal to 90% of FOB value of its exports, subject to overall 50% limit.
The Department called-into-question DTA sales entitlement of Sun Pharmaceuticals alleging that DTA clearance of dis-similar products at concessional duty rate was made by it. A differential duty demand of ₹3.90 crore excise duty with interest; penalty under Section 11AC of the Central Excise Act, 1935
In a ruling dated December 26, 2025, a Division Bench comprising Mr. Somesh Arora (Judicial Member) and Mr. Satendra Vikram Singh (Technical Member) decided whether definition of 'Similar Goods' in terms of Rule 2(f) of the 2007 Customs Valuation Rules would apply to 'Carisoprodol' and 'Tizanidine HCL' both shown as Muscle Relaxant. Further, the Bench asked the Adjudicating Authority to re-look at if DTA Sales entitlement was to be calculated by considering both physical Exports and deemed exports.
Pharma Company made submissions on why Bulk Drugs and their Intermediates having similar therapeutic use, could not be considered as similar products. It was contended that FOB value of deemed exports should be included in FOB value of physical exports for determining the DTA sales entitlement. It was thus contended that overall DTA entitlement, 50% of FOB value, was not breached.
Dis-similarity Muscle Relaxant cleared in DTA sale vis-à-vis Exports
While the Department contended that 'Carisoprodol' and 'Tizanidine HCL' were not commercially interchangeable, the Pharmaceutical Company put forth that they were similar to exported goods.
On this aspect, the CESTAT Ahmedabad directed the Pharmaceutical Company to provide details of ER-2 returns and supporting documents. It outlined parameters for adjudging 'similarity' by referring to Foreign Trade Policy and a 1995 CBIC Circular on guidelines to check similarly of goods.
In turn, CESTAT Ahmedabad instructed the Adjudicating Authority to refer to composition and use of Pharmaceutical drugs specific ailments, trade or proprietary name etc. as same were highly technical subjects.
Accordingly, the appeal by Pharmaceutical Company was allowed by way of remand for re-determination of central excise duty liability on the
Case Name: Sun Pharmaceuticals Industries Limited
For Appellant: Chartered Accountant Ashok B Naval
For Respondent: Mr. R K Agarwal (Authorised Representative)