TaxTMI 
TaxTMI 
2026 (9) TMI 1516
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.... Mishra. JUDGMENT (PER SUMAN SHYAM, J):- 1. Rule. Rule made returnable forthwith. By consent of the parties, both these Writ Petitions are taken up for final hearing and disposal. 2. The Writ Petitioners are operating their respective Duty Free Shops (DFSs) in the Departure Terminal of the Chhatrapati Shivaji Maharaj International Airport Terminals at Mumbai. The Petitioners in Writ Petition No. 3079 of 2026 and Writ Petition (L) No. 20740 of 2026 are both inter alia selling an imported product called "Nicotine pouch" in the DFS under the brand names, "ZYN" and "FOX", the sale of which has been banned by the authorities, apparently due to want of licence issued under The Drugs and Cosmetics Act, 1940 (hereinafter referred to as "the Act of 1940") and the Rules framed thereunder. Aggrieved thereby, both the Writ Petitioners have approached this Court by filing these Writ Petitions seeking identical reliefs. Since both these Writ Petitions raise common questions of law and are based on identical facts, hence these are being disposed of by this common judgment and order. 3. For the purpose of these proceedings, the facts involved in Writ Petition No. 3079 of 2026 are be....
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....of hearing before the authorities. On 10th November 2025, the Respondent No. 4 had called upon the Petitioner to furnish (i) the Bill of Entry under which the product was imported/warehoused as well as the documents connected therewith including the exemption Notification, if any; and (ii) NOC/Exemption from the concerned government agencies. In response to the communication dated 10th November 2025, on 13th November 2025, the Petitioner had forwarded the relevant Bill of Entry, while reiterating its earlier stand that since the DFS operates beyond the customs frontier and the product fell under the DGFT's (Directorate General of Foreign Trade) "free classification" policy, no NOC/Exemption was legally required to sell the product in the DFS. The Respondent No. 4 had, however, not accepted such claims of the Petitioner and instead, issued a communication dated 15th December 2025 alleging that in the Bill of Entry, only the brand name of the product, viz., "ZYN" has been reflected instead of specifically mentioning "Nicotine Pouches" and, therefore, called upon the Petitioner to show cause as to why, such specific description was avoided in the Bill of Entry. Since the Petitioner di....
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....t be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other writ, order and direction: (i) ordering and declaring that the Drugs and Cosmetic Act 1940 and Drugs and Cosmetics Rules 1945 do not apply to the Petitioner in relation to its business and activities conducted at the Petitioner's Duty Free Shops and/or the nicotine pouches available, displayed and/or sold at the said Duty Free Shops and as such the impugned Communications dated 08 April 2026 read with 02 April 2026 (at Exhibit "K" hereto) are without jurisdiction and legal authority; (ii) restraining, injuncting and/or prohibiting Respondents No. 1 to 4, their respective servants, officers and/or agents from in any manner (directly and/or indirectly) applying the Drugs and Cosmetic Act, 1940 and Drugs and Cosmetics Rules, 1945 to the Petitioner for and in respect of their business and activities conducted at the Duty Free shops and/or nicotine pouches sold at the Petitioner's Duty Free Shops; and (ii) restraining, injuncting and/or prohibiting Respondents No. 1 to 4, their respective servants, officers and agents from in any manner (directly and/or indirectly....
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....initiating any coercive action against the Petitioner pertaining to the existing stock of Nicotine Pouches held in its Duty Free Shop. However, further import of the product has remained suspended in view of the communication dated 2nd April 2026 issued by the Respondent No. 3. 7. As noted above, the pleaded case of the Petitioner is that since the purchase of the product is from foreign suppliers and the product is being sold only in the Duty Free Shops at the Departure Terminal of the International Airport and within the customs barrier of the Airport, hence, the domestic municipal laws, including the Rules and Regulations framed under the Drugs and Cosmetics Act, 1940, would not have any application to such products. Therefore, there was no requirement on the part of the Petitioner to obtain any licence under the Drugs and Cosmetics Act or the Rules framed thereunder. 8. The stand of the Respondents, on the other hand, has been that, although the product is being sold in the Departure Terminal of the International Airport, yet, the passengers take possession of the goods immediately after the sale and are also free to consume the same even on the Indian soil. Considering t....
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....he product was imported for the purpose of re-export, the provisions of the Act of 1940 and the Rules framed thereunder, would have no application in case of such product. In support of his above arguments, Mr. Dwarkadas has relied upon and referred to the following decisions:- 1. Garden Silk Mills Limited & Anr. v. Union of India & Ors. - (1999) 8 SCC 744. 2. Flemingo Dutyfree Shop Private Limited v. The State of Karnataka - ILR 2009 KAR 3462. 3. DFS India Private Limited v. Commissioner of Custom - Special Leave Petition (C) No. 2436 of 2010. 4. DFS India Private Limited & Anr. v. The Commissioner of Customs-Writ Petition No. 2578 of 2009. 5. Indian Tourist Development Corporation Limited v. Assistant Commissioner of Commercial Taxes & Anr. -(2012) 3 SCC 204. 6. DFS India Private Limited & Anr. v. Union of India & Ors. Writ Petition (L) No. 975 of 2014. 7. DFS India Private Limited & Anr. v. Union of India & Ors.-Writ Petition (L) No. 2136 of 2014 (renumbered as Writ Petition No. 2680 of 2014). 8. DFS India Private Limited & Anr. v. Union of India & Ors.-Writ Petition No. 2680 of 2014. 9. DFS India P....
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....er argued that since 'Nicotine' is considered as an API (Active Pharmaceutical Ingredient) Agent and/or a pharmaceutical ingredient within the meaning of Section 3(b) of the Act of 1940, hence, its import, sale or stocking in India, without a valid licence, would be prohibited under Section 11 of the Act of 1962 as well. On such count, Mr. Singh has, therefore, submitted that the Respondent No. 3 was not only justified in insisting on a licence but the Customs Authorities were also well within their authority and jurisdiction to ban the sale of the product unless the DFS complies with the regulatory regime. It is also the contention of Mr. Singh that the present case will be squarely covered by the judgment of this Court in the case of Glamstone Cosmetics Pvt. Ltd. Vs. Union of India & Ors. (Supra) and, therefore, the Writ Petition(s) is/ are liable to be dismissed. 14. We have considered the submissions made at the Bar and have also gone through the material available on record. 15. After a careful analysis of the projections made by the contesting parties, we are of the view that, two important questions, having a substantial bearing in the outcome of the proceeding(s), wou....
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....ods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with; x x x x x x x x x x x x x x x x x x Section 11: 11. Power to prohibit importation or exportation of goods. (1) If the Central Government is satisfied that it is necessary so to do for any of the purposes specified in sub-section (2), it may, by notification in the Official Gazette, prohibit either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification, the import or export of goods of any specified description. (2) The purposes referred to in sub-section (1) are the following:- (a) the maintenance of the security of India; (b) the maintenance of public order and standards of decency or morality; (c) the prevention of smuggling; (d) the prevention of shortage of goods of any description; (e) the conservation of foreign exchange and the safeguarding of balance of payments; (f) the prevention of injury to the economy of the country by the uncontrolled import or export of gold or silver; ....
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....duced hereinbelow for ready reference:- "3. Definitions.-In this Act, unless there is anything repugnant in the subject or context, (b) "drug" includes- (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes; (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of [vermin] or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette; (iii) all substances intended for use as components of a drug including empty gelatin capsules; and (iv) such devices* intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notificatio....
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.... (iii) any patent or proprietary medicine, unless there is displayed in the prescribed manner on the label or container thereof the true formula or list of active ingredients contained in it together with the quantities thereof; (iv) any drug which by means of any statement, design or device accompanying it or by any other means, purports or claims [to prevent, cure or mitigate] any such disease or ailment, or to have any such other effect as may be prescribed; (v) any cosmetic containing any ingredient which may render it unsafe or harmful for use under the directions indicated or recommended; (vi) any drug or cosmetic in contravention of any of the provisions of this Chapter or any rule made thereunder; (b) sell, or stock or exhibit or offer for sale, or distribute any drug or cosmetic which has been imported or manufactured in contravention of any of the provisions of this Act or any rule made thereunder; (c) manufacture for sale or for distribution, or sell, or stock or exhibit or offer for sale, or distribute any drug or cosmetic, except under, and in accordance with the conditions of, a licence issued for such purpose under....
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....ic purchaser and the foreign supplier was in the nature of CIF contract, i.e., price-included cost, insurance and freight charges contract. Under the contract, the price paid by the purchaser included not only the cost of the goods but also the insurance and the freight charges. Notwithstanding the same, the customs authorities, while determining the value of the goods for the purpose of ascertaining the amount of duty payable, had added to the CIF price, the landing charges which were paid to the Port Trust Authorities. In that case, the Apex Court had considered the concept of import in the context of the assessment and payment of import duty under the Customs Act, particularly when goods are cleared for home consumption under Sections 47 and held that import is completed when the goods become part of the goods within the country. Therefore, the taxable event is reached when the goods cross the customs barriers and the Bill of Entry for home consumption is filed. It is in such factual backdrop, the Supreme Court had made the following observations in paragraph 18 which are reproduced hereinbelow for ready reference:- "18. It would appear to us that the import of goods in....
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....ing of the judgments rendered in the case of Garden Silk Mills Limited & Anr. v. Union of India & Ors. (Supra) as well as in M/s. Hotel Ashoka (Indian Tour Dev. Cor. Ltd) Vs. Assistant Commissioner of Commercial Taxes & Anr. (Supra), it is thus apparent that those precedents exclusively deal with the taxable events for assessing customs duty and sales tax/VAT. The decisions do not extend any blanket immunity to the DFS operators from the domestic regulatory or public health laws of the country. The aforesaid decisions relied upon by the learned Senior Counsel for the Petitioner(s) are also not the authorities for the proposition that all transactions taking place in the DFS, beyond the Customs frontier, would enjoy blanket exemption/immunity from the domestic regulatory regime. On the contrary, the issue appears to be squarely covered by the decision of a co-ordinate Bench of this Court in Glamstone Cosmetics Pvt. Ltd. Vs. Union of India & Ors. (Supra). 23. In Glamstone Cosmetics Pvt. Ltd. Vs. Union of India & Ors. (Supra), the Petitioner (therein) was engaged in the import and trading of cosmetics. Accordingly, consignments of cosmetics and FMCG (Fast Moving Consumer Goods) wer....
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....means any goods, the import or export of which is "subject to any prohibition" under the Act "or any other law for the time being in force". Also Section 11 A(a) defines "illegal import" to mean the import of any goods in contravention of the provisions of the Act or "any other law for the time being in force". It is in the context of the said provisions, Chapter VII of the Customs Act which inter alia provide for clearance of imported goods are required to be considered in Section 46 provides for 'Entry of goods on importation.' 33. On a cumulative application of the provisions of the Customs Act (supra) read with the provisions of the Drugs and Cosmetics Act, 1940 and the Cosmetics Rule 2020, qua the goods in question, the following appears to be the apparent requirement of law: (i) The import of the goods in question which are Cosmetics certainly falls within the expression of import as defined under Section 2(23) i.e., bringing into India from a place outside India and the term India as defined under Section 2(27) includes the territorial waters of India and not the port of arrival or the goods being warehoused, the warehouse being on Indian territory, meaning....
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....ct to the prohibition either under the Customs Act or "any other law for the time being in force", stand breached and/or not complied thereby rendering the goods, in question "prohibited goods". 37. Thus, the goods in question as imported by the petitioner being prohibited goods, the provisions of Section 110 of the Customs Act providing for seizure and the provision of Section 111 providing for confiscation of improperly imported goods, would stand attracted and applicable. This more particularly, clause (d) of Section 111 which provides that the goods would be liable for confiscation when goods which are imported or attempted to be imported or are brought within the Indian Customs Waters for the purpose of being imported, contrary to any prohibition imposed by or under the Customs Act or any other law for the time being in force. In such circumstances, applying the statutory provisions as discussed hereinabove, to the goods in question, which were imported by the petitioner without a licence, the legal character of the goods certainly is of these goods being "prohibited goods" as defined under Section 2(33) of the Customs Act. 38. On the aforesaid complexion, th....
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.... be applied. This is totally unacceptable and in fact illegal. The provisions of law as discussed hereinabove do not permit that these goods can be brought into the Country only for the purpose of warehousing and that too contravening and/or circumventing the provisions of law. The consequence of such contentions as urged on behalf of the petitioner, would be to the effect that Indian territory permits prohibited goods to be brought into India, merely for the purpose of warehousing, on a specious consideration that warehousing is cheaper in India than in other countries, and therefore such unlicenced imports be permitted, for the goods to be ultimately re- exported. This would be too far fetched. We do not gather any such intention under any provisions of law as urged before us. The imports in question being per se illegal cannot be labelled to be legitimate or legal, merely because the petitioner intends to re-export the goods and for which no duty according to the petitioner is attracted." 25. The decision in Glamstone Cosmetics Pvt. Ltd. (supra), has established that goods brought into India from outside the country would mean and include goods brought within the "territorial....
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....diagnosis, treatment, mitigation or prevention of disease or disorder. Under Section 3(b)(i) of the Act of 1940, a substance will qualify as a drug if its intended use is in diagnosis, treatment, mitigation or for prevention of any disease / disorder (e.g. Nicotine Replacement Therapy). 29. Section 3(b)(ii) covers substances, other than food, intended to affect the structure or function of the human body "as may be specified from time to time by the Central Government by notification in the Official Gazette." Therefore, substances which come within the definition of 'drug' under Section 3(b)(ii) must be included in a Central Government Notification published in the Official Gazette. 30. An import licence is required for importing all drugs into India but the requirement is subject to the exemptions prescribed under the Act of 1940 and the Drugs and Cosmetics Rules, 1945. Section 10(c) of the Drugs and Cosmetics Act, 1940, prohibits the import of "any drug or cosmetic for the import of which a licence is prescribed, otherwise than under, and in accordance with, such licence." 31. Section 11 of the Act of 1962 confers power on the Central Government to prohibit importation o....
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.... to be noted herein is that Rule 43 read with Schedule-D of the Act of 1940 exempts substances that are not intended for medical use, from the application of Chapter III (Import of Drugs and Cosmetics). In those cases, requirements of registration and import licence may not apply, subject to the fulfillment of the prescribed conditions. 36. Under the DGFT Notification dated 9th February 2022, specified finished Tobacco products including those containing nicotine have been declared as falling under the "prohibited" category. However, the product description does not include products licensed under the Act of 1940. We also find that "Nicotine" under ITC (HS) 24049100 "for oral application" is "free" under the DGFT framework. Therefore, by necessary implication, it is apparent that all forms of Nicotine may not necessarily be "restricted" or "prohibited" and hence may not come within the ambit of definition of "drug" under Section 3(b) of the Act of 1940. A licence would be required only in case of a "drug" under Section 3(b) of the Act of 1940. It is only in such cases that import of the product without a valid import licence would be prohibited under Section 10 of the Act of 194....
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....tral Licensing Authority. The NDCT Rules also, inter alia, treat a drug proposed to be marketed in a new dosage form or through a new route and certain novel drug-delivery systems, as a "new drug" under Rule 2(w). 41. Tobacco-free nicotine, which is specifically intended and marketed as a smoking cessation/NRT (Nicotine Replacement Therapy) has a substantially wider basis for classification under Section 3(b)(i) of the Act of 1940, because its intended use can also be connected with treatment. However, a nicotine pouch marketed purely as a recreational nicotine product, without any therapeutic or cessation claims, may not automatically come under the purview of Section 3(b)(i) merely because nicotine has physiological effects. Therefore, a tobacco-free nicotine pouch may not necessarily be a "drug" within the meaning of Section 3(b) merely because it contains pharmacologically active nicotine/ tobacco-free nicotine. Unless it is found that the product is used in the diagnosis, treatment, mitigation or prevention of any disease or disorder, it may not qualify as a "drug". Whether or not a particular composition/ formulation in the form of "Nicotine Pouch" would satisfy the requir....
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....efore, is reproduced herein below for ready reference:- "Sir, With reference to the subject cited above, it is to inform that the Drugs Inspector from this office inspected the duty-free shops at Terminal 2 (Arrival & Departure) on 05-03-2026. The inspection report, along with supporting documents, has been submitted (copy enclosed). As per the findings of the inspection, nicotine pouches (3 mg and 6 mg) marketed under the trademark "FOX" are being imported by M/s Mumbai Travel Retail Private Limited vide Bill of Entry No. 5386403 dated 29-10-2025. These products are supplied by M/s Swedish Smokeless Solutions AB, Sweden, and are currently being sold at the duty-free shop located at Terminal 2 Departure, Mumbai International Airport. It is pertinent to note that certain nicotine-containing formulations are approved for sale in India, such as Nicotine transdermal patches (36 mg, 78 mg, 114 mg), Nicotine lozenges (2 mg, 4 mg), and Nicotine gums. These formulations fall under the definition of "Drug" and are regulated under the Drugs and Cosmetics Act, 1940. In this context, the said Nicotine pouches also fall within the definition of "Drug....
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....er the Act of 1940 and the Rules framed thereunder. In the present case, we find that such particulars are completely missing. 48. Whether import licence and/or Registration Certificate would be required or not will depend on whether the composition of the product legally constitutes a "drug" under Section 3(b). Such determination would require detailed factual verification of the product specification. However, it is an admitted fact that the Petitioner has not furnished the product specification to the Respondents. It is also not clear from the material on record, as to what is the exact nature of composition of the product, insofar as its Nicotine content is concerned. Therefore, it is not possible for this Court to record a finding on the above issue. 49. Whether a specific composition is a "drug" under Section 3(b) having a therapeutic use or if it qualifies under Schedule-D/ Schedule K exemptions would require factual inquiry. This Court does not have the expertise either to embark on such a factual inquiry or to express any opinion in the matter. Therefore, these are not matters that can be determined or adjudicated in a Writ Petition in exercise of jurisdiction under ....