The Allahabad High Court has rejected Patanjali Ayurved Limited’s petition challenging a ₹273.5 crore penalty under the GST Act.
A bench of Justices Shekhar B Saraf and Vipin Chandra Dixit ruled that the penalty is part of civil proceedings and does not need a criminal trial. Patanjali had argued that the penalty was similar to a criminal charge and should only be imposed after a proper trial, but the court did not agree.
The judges clarified that under Section 122 of the CGST Act, tax officers have the power to impose penalties through civil processes.
Patanjali, which runs factories in Haridwar, Sonipat, and Ahmednagar, came under investigation after authorities noticed suspicious transactions. These involved firms with high Input Tax Credit (ITC) usage but no proper income tax records.
Officials suspected that Patanjali was involved in circular trading — issuing invoices without actually supplying goods. Based on these findings, the Directorate General of GST Intelligence (DGGI) in Ghaziabad issued a show-cause notice on April 19, 2024, proposing the ₹273.5 crore penalty.
On January 10, 2025, the tax department dropped the main tax demand under Section 74, saying that Patanjali had passed on the ITC properly. However, they decided to continue the penalty proceedings under Section 122.
Patanjali challenged this in the high court, but on May 29, the court ruled that the penalty was valid and dismissed the petition.
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