Daijiworld Media Network- Prayagraj
Prayagraj, Jun 3: In a significant development, the Allahabad High Court has rejected a petition filed by Patanjali Ayurved Limited, challenging a hefty penalty of Rs 273.50 crore imposed under the Goods and Services Tax (GST) Act.
The division bench comprising Justice Shekhar B Saraf and Justice Vipin Chandra Dixit observed that proceedings under Section 122 of the CGST Act are civil in nature, and hence, do not require a criminal trial for enforcement.
Patanjali Ayurved had argued that the penalty was akin to a criminal liability and should be adjudicated through a criminal court. However, the court firmly dismissed this notion, stating that tax authorities are well within their rights to impose penalties through civil adjudication.
"The process of levying penalty under Section 122 is independent of any criminal prosecution and is to be decided by the adjudicating officer," the court noted in its judgment dated May 29.
The case stems from an investigation initiated by the Directorate General of GST Intelligence (DGGI), Ghaziabad, which had flagged suspicious transactions by Patanjali across its units in Haridwar (Uttarakhand), Sonipat (Haryana), and Ahmednagar (Maharashtra). Authorities alleged circular trading of invoices without actual movement of goods.
Following a show cause notice dated April 19, 2024, the DGGI proposed a penalty under Section 122(1), clauses (ii) and (vii) of the CGST Act. However, tax demands under Section 74 were later dropped through an adjudication order issued on January 10, 2025.
Despite this, the department continued with the penalty proceedings, citing discrepancies such as sales volumes exceeding purchases and alleged misuse of Input Tax Credit (ITC).
Patanjali challenged this action in the high court, but the court stood by the enforcement agencies, reinforcing the principle that tax compliance must be upheld with due seriousness.
The verdict is seen as a major setback for Patanjali Ayurved and sets a precedent for similar cases involving tax penalty disputes.