Traces of a cancer-causing chemical were found in a stock of cotton candy that was ready for sale in the Kollam district on Wednesday.
The Food Safety Department said the cotton candy raided from a unit at Karunagappally contained traces of Rhodamine B, which is a textile dye that is toxic to humans.
According to the United States' National Library of Medicine, Rhodamine B if used "in food for a long time leads to liver dysfunction or cancer, and when exposed to large amounts over a short period, it results in acute poisoning".
Health Minister Veena George said the department will raid more facilities. A state special task force that was set up recently to tackle food adulteration is conducting the raids.
The food safety department has shut the cotton candy manufacturing unit, where unsafe food colouring was used.
The authorities also found the conditions unhygienic and said strict action will be taken against the proprietors.
Cotton candy is a confection made of sugar and often contains food colouring.
It is a favoured delicacy of children often sold by hawkers at festivals and fairs.