Court holds customs-barrier exemption is limited to fiscal levies, but leaves open whether nicotine pouches qualify as “drugs” under the Drugs and Cosmetics Act, 1940.
Mumbai, Sept. 22, 2026: The Bombay High Court has ruled that Duty Free Shops (DFS) operating beyond the customs barrier at international airports do not enjoy blanket immunity from Indian regulatory laws. The court held that the exemption available to such shops is confined to fiscal levies such as customs duty and taxes, and does not extend to domestic public health and regulatory statutes.
A division bench of Justices Suman Shyam and Advait M. Sethna delivered the verdict while hearing petitions filed by Mumbai Travel Retail Limited and Flemingo Dutyfree Shop Private Limited, both challenging orders that stopped the sale of nicotine pouches branded “ZYN” and “FOX” at the departure terminal of Mumbai’s Chhatrapati Shivaji Maharaj International Airport.
The petitioners argued that since the products were imported for sale only in the Duty Free Shop and were not meant for the domestic market, Indian regulatory laws, including the Drugs and Cosmetics Act, 1940, should not apply. They relied on earlier Supreme Court rulings on customs and tax liability in duty free transactions.
However, the High Court rejected the broad claim of immunity. It said that decisions such as Garden Silk Mills and Hotel Ashoka dealt with taxation and customs valuation, not with the reach of regulatory or public health laws. Relying on its earlier ruling in Glamstone Cosmetics, the court held that goods brought into India, even for warehousing or re-export, are subject to Indian law once they enter territorial waters. If import of such goods is prohibited under any other law in force, they may amount to “prohibited goods” under the Customs Act, 1962.
At the same time, the court stopped short of deciding whether nicotine pouches are in fact “drugs” under Section 3(b) of the Drugs and Cosmetics Act. The bench noted that the definition depends on the product’s composition, intended use, and whether it falls within any statutory exemptions. The impugned order had concluded that nicotine pouches were drugs requiring registration and an import licence, but the High Court found that the communication did not clearly specify under which clause of Section 3(b) the product was classified, nor did it disclose adequate reasons or jurisdictional facts.
The court also observed that the petitioners had not supplied full product specifications, making it impossible for the bench to conclusively determine the issue in writ jurisdiction. It said such a factual inquiry is best left to the competent authority.
In its final order, the High Court granted the petitioners liberty to make a fresh representation before the appropriate authority, including the Central Drugs Standard Control Organisation (CDSCO), along with supporting material to show that the product is either not a drug or is covered by exemptions under Schedule D or Schedule K. If filed within four weeks, the authority has been directed to decide the representation by a reasoned order within 30 days, after giving a personal hearing if necessary.
The court made it clear that while the immediate ban was not quashed on merits, the regulatory authorities must reconsider the matter if fuller product details are placed before them.
Bottom Line:
Duty Free Shops situated beyond customs barrier do not enjoy blanket immunity from domestic regulatory laws; exemption is limited to fiscal levies like customs duty/tax. However, whether nicotine pouches are "drugs" under Section 3(b) of the Drugs and Cosmetics Act, 1940 depends on product composition and intended use, and was left open for determination by competent authority on representation by petitioners.
Statutory provision(s): Customs Act, 1962 Sections 2(23), 2(25), 2(27), 2(33), 11, Drugs and Cosmetics Act, 1940 Sections 3(b), 10, 18, Drugs and Cosmetics Rules, 1945 Rule 123, Rule 43, Schedule D, Schedule K, Article 226 of the Constitution of India
Mumbai Travel Retail Limited v. Union of India, (Bombay)(DB) : Law Finder Doc Id # 2984205
