Introduction:
In a significant interim relief to M/s Dabur India Ltd., the Allahabad High Court, through a Division Bench comprising Justice Saumitra Dayal Singh and Justice Indrajeet Shukla, has stayed a ₹110 crore show-cause notice issued by the Directorate General of GST Intelligence (DGGI) concerning the classification of Hajmola Candy Tablets under the Goods and Services Tax (GST) regime. The case, titled M/s Dabur India Ltd. v. Union of India & Ors., was registered as WRIT TAX No. 4709 of 2025, and the interim order was passed on October 10, 2025. The controversy pertains to whether Hajmola Candy, a digestive tablet-cum-confectionery product, should attract a lower or higher rate of GST, with the DGGI alleging misclassification by the company and proposing a massive tax demand covering six financial years—2018–19 to 2023–24. The High Court’s order halting coercive action against the FMCG giant until further hearing marks another chapter in India’s ongoing debate over the classification of food, medicinal, and confectionery products for taxation purposes.
Arguments of Both Sides:
On behalf of the petitioner, Advocate Atul Gupta, appearing for Dabur India Ltd., presented a detailed and methodical argument highlighting that the DGGI’s demand was not only arbitrary but also legally untenable in light of settled jurisprudence. He contended that the classification issue regarding Hajmola Candy Tablets had already been conclusively adjudicated by the Supreme Court of India under the erstwhile Central Excise Act, wherein Hajmola was recognized as a digestive tablet with therapeutic and medicinal value rather than a mere confectionery item. This prior classification, according to him, remained valid even after the introduction of GST, since the change in the taxation system did not inherently alter the nature of the product or the legal reasoning behind its classification. Gupta asserted that the GST regime, while a new framework for indirect taxation, continues to rely on similar classification principles that existed under the Central Excise and Service Tax regime, particularly those based on the Harmonized System of Nomenclature (HSN).
The petitioner’s counsel further emphasized that the DGGI’s reliance on the World Customs Organization’s revised classification norms was misplaced, as India’s tariff structure and classification decisions must be interpreted in accordance with domestic statutory provisions and not automatically based on international developments. Gupta argued that there was no concealment or misrepresentation of facts by Dabur India, as the company had consistently maintained the same classification over decades, which had also been accepted by the tax authorities in previous assessments. The sudden reclassification by DGGI, according to the petitioner, amounted to a change of opinion without any fresh material—a clear violation of the principles of natural justice and tax certainty.
Gupta also stressed the broader implications of such retrospective reclassifications. If every settled product were to be re-examined and taxed differently under GST without legislative amendment or judicial sanction, it would lead to chaos in the business environment and uncertainty for manufacturers. He submitted that the demand notice, spanning six financial years, was grossly excessive and disproportionate, especially since it included interest and penalties calculated on the presumption of deliberate misclassification, which the company strongly denied. The counsel concluded that the DGGI’s action was an abuse of investigative powers, aimed more at revenue collection than at upholding legal propriety.
On the other hand, representing the Union of India and the respondents, Additional Solicitor General of India Dhananjay Awasthi, assisted by Saumitra Singh, defended the issuance of the show-cause notice. The government argued that Dabur India’s classification of Hajmola Candy Tablets under a lower GST slab was inconsistent with the current GST Tariff Schedule and contrary to the Central Board of Indirect Taxes and Customs (CBIC) clarifications regarding the classification of confectionery and medicated products. The DGGI contended that Hajmola, although marketed as a digestive aid, was commercially and functionally similar to candy in its composition, consumption pattern, and marketing strategy. It was sold in small, sweetened tablets and consumed as a mouth-freshener or confectionery by the general public, especially children, rather than as a therapeutic medicine prescribed by medical practitioners.
The respondents asserted that under GST, product classification must align with its common parlance understanding and commercial identity rather than technical descriptions alone. Thus, even if Hajmola contained digestive ingredients like cumin and black salt, its overall character remained that of a confectionery product. The government counsel argued that the World Customs Organization (WCO) had updated its classification norms to treat similar products under confectionery categories, and India, being a signatory to the WCO convention, must harmonize its interpretation accordingly to prevent classification anomalies. The respondents also justified the six-year coverage of the demand notice by stating that it was within the permissible extended limitation period applicable in cases involving alleged misclassification or short payment of tax.
The Union’s counsel maintained that granting a stay at this stage would undermine the statutory process, as the DGGI’s notice was merely an initiation of adjudication, and Dabur would have a full opportunity to present its case before the competent authority. He urged the Court not to interfere with ongoing investigations at this preliminary stage, emphasizing that judicial restraint is warranted in fiscal matters where statutory remedies exist. The government’s position essentially rested on two pillars: that the product was confectionery in nature, and that the show-cause notice was legally valid under GST provisions for re-examining classification when new evidentiary factors or expert opinions come to light.
Court’s Judgment:
After hearing both sides extensively, the Division Bench of the Allahabad High Court delivered an interim order that underscored judicial prudence and the protection of procedural fairness in tax adjudication. The Court acknowledged the complexity of classification disputes under GST and observed that such matters often require a careful balance between revenue interests and legal stability. Justice Saumitra Dayal Singh, speaking for the Bench, noted that the petitioner had raised substantial legal questions that merited detailed consideration, especially since the issue had been earlier settled under the Central Excise regime by the apex court.
The Court took note of the petitioner’s reliance on precedents where the Supreme Court of India had classified Hajmola Tablets as a digestive aid with medicinal characteristics. It observed that the introduction of the GST regime did not per se alter the nature of the product, nor did it necessarily render previous judicial interpretations irrelevant. Therefore, the Bench considered it appropriate to protect the petitioner from coercive action until the legal position could be definitively examined. The Court highlighted that the ₹110.39 crore demand, spanning multiple financial years, carried significant financial implications, and proceeding with recovery before a final adjudication could result in irreparable harm to the petitioner’s business operations and reputation.
In a strongly worded observation, the Bench indicated that while tax authorities have the power to re-examine product classification, such power must be exercised judiciously and not arbitrarily. The Court noted that in fiscal jurisprudence, the doctrine of consistency holds that settled classifications or interpretations should not be unsettled without compelling reasons. The DGGI’s reliance on alleged changes in international classification norms was found to be of limited relevance, as Indian tax laws and schedules are governed by domestic legislative intent, not automatic international adoption.
Consequently, the Court directed the Union government to file a detailed counter-affidavit within four weeks, addressing all factual and legal issues raised by the petitioner. Dabur India Ltd. was granted an additional two weeks to file its rejoinder. Importantly, until the exchange of affidavits and the next date of hearing, the Bench ordered a complete stay on all proceedings arising from the impugned GST notice. This meant that no coercive action, penalty, or recovery could be initiated against the company until the High Court re-evaluated the matter on merits.
The Bench’s order reflects a balanced judicial approach: it refrained from adjudicating the classification issue outright but ensured that the petitioner’s rights were protected in the interim. By doing so, it reaffirmed the importance of judicial oversight in administrative taxation, ensuring that taxpayer rights are not trampled in the zeal of revenue collection. The interim stay also signals to tax authorities that reclassifying goods already subject to prior judicial scrutiny requires strong justification and adherence to the principles of fairness.
Beyond the immediate relief to Dabur, the High Court’s decision has wider ramifications for FMCG and pharmaceutical companies engaged in manufacturing hybrid products—those with both medicinal and consumable characteristics. The ruling reinforces that product classification cannot be altered unilaterally by tax authorities merely on commercial or visual similarities but must be grounded in scientific evidence, product composition, and judicial precedent.
As the matter proceeds, the Bench’s interim protection underscores a vital message: while GST aims to simplify taxation, its implementation must align with the foundational principles of justice, reasonableness, and legal certainty. The Court’s directive that the matter be revisited only after detailed affidavits are exchanged ensures that both parties will have full opportunity to substantiate their claims and defenses, thereby upholding due process under Article 14 and Article 265 of the Constitution of India.
The High Court’s reasoned intervention also upholds the constitutional guarantee of fair hearing under Article 21. By staying the proceedings, it prevented potential misuse of administrative discretion that could have resulted in disproportionate financial burden. The Court’s interim order thus acts as a safeguard for taxpayers against the risk of retrospective taxation and unjustified reclassification, ensuring that the rule of law prevails over arbitrary fiscal interpretation.
In conclusion, the Allahabad High Court’s order does not merely serve as an interim reprieve to a single company but contributes to the evolving jurisprudence on product classification under GST, setting a judicial precedent for balancing revenue considerations with taxpayer protection. The next hearing will likely determine whether the earlier Supreme Court classification remains binding in the GST era—a decision that could have far-reaching implications for other multi-purpose consumer products straddling the line between food, medicine, and confectionery.