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GST officials find Hajmola Candy tough to digest Hajmola candy, a popular product of Dabur and known for digestion, appears to be causing indigestion for tax officials, as Directorate General of GST Intelligence has initiated an investigation on the issue of classification. It is under investigation. A summon has been issued (to the company). They made certain submission before the investigation, a senior government official told businessline. The issue is whether this is a normal candy or an Ayurvedic preparation. In the case of a normal candy, the GST will be 18 per cent, while in the case of an Ayurvedic preparation, the rate would be 12 per cent. When contacted, the company did not respond. However, sources said that a similar issue was raised during the pre-GST regime, when the Supreme Court in 2002 had dismissed an appeal filed by the Commissioner of Central Excise, Chandigarh, against a ruling by the erstwhile CEGAT (Central Custom, Excise & Gold Appellate Tribunal, now known as the Customs Excise and Service Tax Appellate Tribunal or CESTAT), which CEGAT reiterated that Hajmola Tablets are Ayurvedic medicines. In another ruling by Allahabad High Court in 2016, when Uttar Pradesh's Commercial Tax Department appealed against a ruling by a tribunal which held that 'Chyawanpras,' 'Hajmola' and 'Hajmola Candy' are medicines for the proposes of tax. The Department challenged the ruling by questioning: Whether, on the facts and circumstances of the case, the tribunal was legally justified in holding 'Chyawanprash,' 'Hajmola' and 'Hajmola Candy' to be medicines even though they are not sold in the medical shops but rather in general stores? The court took note of the tribunal's observation where it was said that all the said three products are being manufactured by Dabur India for many years under the license granted to it by the Ayurvedic and Unani Services under the Drug and Cosmetics Act, 1940. The tribunal held that any product that is manufactured under a license for manufacturing a drug then the nature of the product would be that of a medicine. The court also highlighted the matter of Lal Dant Manjan, which is manufactured based on a license issued under the Drugs and Cosmetics Act and would be treated as medicine/drugs. The place of sale of any product is not a relevant criterion for determining its nature as to whether it is a drug/medicine or an item of general use; rather, the relevant criterion is the license under which such a product is being manufactured, and if the license is for the purposes of manufacturing a drug or medicine under the relevant statute, the product would essentially be a drug/medicine, it said while dismissing the appeal by the tax department. Meanwhile, Hajmola candy is the latest case of misclassification after donut. Mumbai-based MOD got Rs100 crore tax notice from the DGGI for allegedly misclassifying its donuts. The chain is charged with paying a 5 per cent GST rate on donuts, claiming they qualify as restaurant services instead of the 18 per cent tax applicable to bakery items. The Bombay High Court has asked not to take coercive action and will take up this matter on April 22. www.thehindubusinessline.com, dt. 14-04-2025

GST officials find Hajmola Candy tough to digest

Hajmola candy, a popular product of Dabur and known for digestion, appears to be causing indigestion for tax officials, as Directorate General of GST Intelligence has initiated an investigation on the issue of classification.

It is under investigation. A summon has been issued (to the company). They made certain submission before the investigation, a senior government official told businessline. The issue is whether this is a normal candy or an Ayurvedic preparation. In the case of a normal candy, the GST will be 18 per cent, while in the case of an Ayurvedic preparation, the rate would be 12 per cent.

When contacted, the company did not respond. However, sources said that a similar issue was raised during the pre-GST regime, when the Supreme Court in 2002 had dismissed an appeal filed by the Commissioner of Central Excise, Chandigarh, against a ruling by the erstwhile CEGAT (Central Custom, Excise & Gold Appellate Tribunal, now known as the Customs Excise and Service Tax Appellate Tribunal or CESTAT), which CEGAT reiterated that Hajmola Tablets are Ayurvedic medicines.

In another ruling by Allahabad High Court in 2016, when Uttar Pradesh's Commercial Tax Department appealed against a ruling by a tribunal which held that 'Chyawanpras,' 'Hajmola' and 'Hajmola Candy' are medicines for the proposes of tax. The Department challenged the ruling by questioning: Whether, on the facts and circumstances of the case, the tribunal was legally justified in holding 'Chyawanprash,' 'Hajmola' and 'Hajmola Candy' to be medicines even though they are not sold in the medical shops but rather in general stores?

The court took note of the tribunal's observation where it was said that all the said three products are being manufactured by Dabur India for many years under the license granted to it by the Ayurvedic and Unani Services under the Drug and Cosmetics Act, 1940. The tribunal held that any product that is manufactured under a license for manufacturing a drug then the nature of the product would be that of a medicine.

The court also highlighted the matter of Lal Dant Manjan, which is manufactured based on a license issued under the Drugs and Cosmetics Act and would be treated as medicine/drugs. The place of sale of any product is not a relevant criterion for determining its nature as to whether it is a drug/medicine or an item of general use; rather, the relevant criterion is the license under which such a product is being manufactured, and if the license is for the purposes of manufacturing a drug or medicine under the relevant statute, the product would essentially be a drug/medicine, it said while dismissing the appeal by the tax department.

Meanwhile, Hajmola candy is the latest case of misclassification after donut. Mumbai-based MOD got Rs100 crore tax notice from the DGGI for allegedly misclassifying its donuts. The chain is charged with paying a 5 per cent GST rate on donuts, claiming they qualify as restaurant services instead of the 18 per cent tax applicable to bakery items. The Bombay High Court has asked not to take coercive action and will take up this matter on April 22.

www.thehindubusinessline.com, dt. 14-04-2025