India Pharma Outlook Team | Wednesday, 07 January 2026
Sun Pharmaceutical Industries has secured a major win after the Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal granted Sun Pharma CESTAT relief by setting aside a Rs 39 crore excise duty demand raised by tax authorities.
The ruling provides immediate relief to India’s largest drugmaker and offers important clarity for export-oriented pharmaceutical manufacturers.
The dispute stemmed from excise duty benefits claimed by Sun Pharma’s export-oriented unit in Panoli, Gujarat. Tax authorities alleged that the company violated conditions under the relevant excise notification by selling certain products in the domestic market at concessional rates. The department argued that some products exceeded the permissible value limit linked to exports, while others were either not exported or were different from the goods sold overseas.
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After examining the case, the tribunal held that the adjudicating authority failed to properly consider key aspects of the Foreign Trade Policy. The CESTAT emphasized that the value of deemed exports must be included while calculating export turnover, a factor that directly impacts the eligibility for domestic sales at reduced duty. This interpretation formed a crucial basis for granting Sun Pharma CESTAT relief.
While the tribunal upheld the department’s right to invoke the extended limitation period based on audit findings, it found the duty demand unsustainable in its current form. As a result, the order raising excise duty, interest, and penalties was set aside, with the matter sent back for fresh examination in line with the tribunal’s observations.
From an industry perspective, the ruling is significant as it reinforces a more balanced approach to interpreting export-linked tax incentives. It is expected to influence similar cases involving pharmaceutical exporters and reduce uncertainty around excise compliance for export-oriented units.
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