Querying Custom Post Type, ordering by Custom Taxonomy Pagination Not Working

You have to use $paged variable like this :

<?php

$paged = (get_query_var('paged')) ? get_query_var('paged') : 1;
$posts = get_posts(array(
        'post_type' => 'product',
        'taxonomy' => $category->taxonomy,
        'term' => $category->slug,
        'posts_per_page' => 10,
        'paged' => $paged
    ));