In a plea filed challenging the hefty GST fine imposed on Patanjali for issuing tax invoices without actual transfer of goods, the Allahabad High Court upheld the imposition of a ₹273.50 crore penalty, maintaining that GST authorities have the power to levy civil penalties without initiating criminal proceedings.
The court determined that civil penalties are enforceable without the need for a criminal trial, cautioning businesses regarding tax compliance in Prayagraj on May 29.
The court upheld the power of tax officials to impose civil penalties under the GST law without requiring a criminal trial, reaffirming enforcement authority under the Central GST Act. It specified that actions based on Section 122 of the GST Act are civil in nature and do not entail prosecution or any criminal proceedings.
The case centres on serious accusations against Patanjali Ayurveda, which faces claims of engaging in circular trading. The Ghaziabad unit of the Directorate General of GST Intelligence (DGGI) alleges that the company issued tax invoices without actual transportation of goods. These transactions were reportedly linked to companies that claimed excessive Input Tax Credit (ITC) without corresponding income tax documentation.
Following an inquiry, on April 19, 2024, the DGGI issued a show-cause notice to Patanjali, suggesting a penalty of ₹273.50 crore under clauses (iii) and (vii) of Section 122(1) of the CGST Act, 2017. Although a previous tax demand under Section 74 had been revoked by an adjudication order on January 10, 2025, officials cited evident discrepancies in the transaction records as grounds for the penalty.
The court’s ruling upheld the validity of the penalty, stating that civil penalties fall within the authority granted to tax officials by the GST legislation.