ALLAHABAD, June 3, 2025 – The Allahabad High Court has rejected a plea by Patanjali Ayurved Limited, challenging a Rs 273.5 crore penalty imposed on the company for alleged Goods and Services Tax (GST) violations. The ruling was delivered by a division bench comprising Justices Shekhar B Saraf and Justice Vipin Chandra Dixit.
Patanjali Ayurved had argued that penalties for GST violations should only be imposed following criminal trials. However, the court clarified that tax authorities have the authority to impose penalties through civil proceedings.
The bench stated, “After detailed analysis, it is clear that the proceeding under Section 122 of the CGST Act is to be adjudicated by the adjudicating officer and is not required to undergo prosecution.”
The case against Patanjali Ayurved arose following investigations into suspicious transactions linked to firms that utilized high Input Tax Credit (ITC) without proper income tax credentials. Allegations surfaced that Patanjali was involved in circular trading of tax invoices, which were merely on paper and did not reflect actual goods supply.
The Directorate General of GST Intelligence (DGGI) issued a show cause notice on April 19, 2024, proposing the hefty penalty under Section 122(1) of the Central Goods and Service Tax Act, 2017. Although the DGGI later dropped tax demands under Section 74, it decided to proceed with the penalty under Section 122, prompting Patanjali to challenge this decision in court.
The dismissal of Patanjali’s plea marks a significant development in the ongoing scrutiny of GST compliance among major firms. The ruling reinforces the authority of tax officials to impose penalties without the need for criminal proceedings, setting a precedent for future cases in the realm of GST enforcement.
