CESTAT Ahmedabad Remands Sun Pharma DTA Clearance Dispute, Orders Fresh Review Of Similarity Of Muscle Relaxant Drugs
Pranav B Prem
The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has remanded a dispute involving Sun Pharmaceutical Industries Limited concerning its entitlement to clear goods in the Domestic Tariff Area (DTA) at a concessional rate of duty. The Tribunal directed the adjudicating authority to undertake a fresh examination of the composition, therapeutic usage, product patents and similarity of muscle relaxant drugs sold domestically vis-à-vis those exported, before determining the correct excise duty liability. A Division Bench comprising Judicial Member Somesh Arora and Technical Member Satendra Vikram Singh, by an order dated December 26, 2025, examined whether the products Carisoprodol and Tizanidine HCL, both described as muscle relaxants, could be treated as “similar goods” for the purpose of availing concessional duty under the applicable excise notification.
Sun Pharmaceutical Industries Limited, an Export Oriented Unit (EOU), had cleared multiple pharmaceutical products in the Domestic Tariff Area at a concessional rate of duty in terms of Notification No. 23/2003-CE dated March 31, 2003. Under the scheme applicable to EOUs, DTA clearances are permitted up to 50% of the Free-on-Board (FOB) value of physical exports, subject to further restrictions under the Foreign Trade Policy, which limits domestic sale of any specific product to not more than 90% of the FOB value of exports of that product.
The Department questioned Sun Pharma’s entitlement to such DTA clearances, alleging that the company had sold products in the domestic market which were not similar to the products exported, while still availing concessional duty. On this basis, a differential excise duty demand of about ₹3.90 crore was raised, along with interest and penalty under Section 11AC of the Central Excise Act, 1944.
The core dispute before the Tribunal revolved around whether Carisoprodol and Tizanidine HCL, though both classified as muscle relaxants, could be considered “similar goods” within the meaning of the applicable provisions. The Department contended that the two drugs were not commercially interchangeable and differed in composition and use, and therefore DTA sales of one could not be linked to exports of the other for entitlement purposes.
On the other hand, the pharmaceutical company argued that both products had similar therapeutic use and fell within the same category of muscle relaxants. It was further contended that the calculation of DTA sales entitlement ought to include not only physical exports but also deemed exports, and that when so computed, the overall ceiling of 50% of FOB value had not been breached.
While considering these rival submissions, the Tribunal noted that the determination of “similarity” in pharmaceutical products is a highly technical exercise. It observed that such an assessment cannot be carried out in a superficial manner and must take into account factors such as chemical composition, therapeutic application, intended use for specific ailments, trade or proprietary names, and commercial interchangeability.
The Bench referred to the relevant provisions of the Foreign Trade Policy as well as a 1995 CBIC circular laying down guidelines for examining similarity of goods. It directed that these parameters be applied while reassessing the issue. The Tribunal also asked the adjudicating authority to verify the ER-2 returns and other supporting documents to properly evaluate the nature of DTA clearances and exports.
The Tribunal further directed the adjudicating authority to re-examine whether DTA sales entitlement should be computed by considering both physical exports and deemed exports, as contended by the assessee, and to arrive at a fresh conclusion in accordance with law after granting due opportunity of hearing. In view of the above, the CESTAT Ahmedabad allowed the appeal by way of remand, setting aside the impugned order and directing a fresh adjudication on the issues relating to product similarity and DTA sales entitlement.
Appearance
For Appellant: Chartered Accountant Ashok B Naval
For Respondent: Mr. R K Agarwal (Authorised Representative)
Cause Title: Sun Pharmaceuticals Industries Limited
Case No: Excise Appeal No. 12185 of 2019-DB
Coram: Judicial Member Somesh Arora, Technical Member Satendra Vikram Singh
