High Court Temporarily Halts Enforcement of ₹273.5 Crore GST Fine against Patanjali
Supreme Court Hears Patanjali Ayurved's Challenge Against GST Penalty
Patanjali Ayurved Limited, one of India's leading FMCG companies, is currently facing a significant challenge in the Supreme Court of India. The company is contesting a ₹273.5 crore Central Goods and Services Tax (GST) penalty imposed by the authorities for alleged irregularities in its GST filings.
The penalty was imposed after an investigation by the Directorate General of GST Intelligence (DGGI) accused Patanjali of engaging in circular trading through entities that claimed high Input Tax Credit (ITC) without corresponding income tax records. This led to the issuance of a ₹273.51 crore show-cause notice under Section 122(1)(ii) and (vii) of the Central GST Act, 2017 in April 2024.
The Allahabad High Court upheld the penalty on May 29, 2025, dismissing Patanjali’s challenge. The court held that proceedings under Section 122 are civil in nature rather than criminal. Subsequently, Patanjali appealed to the Supreme Court.
The Supreme Court, through a Bench of Justices PS Narasimha and AS Chandurkar, has stayed the enforcement and recovery of the ₹273.5 crore penalty while it considers Patanjali's appeal. The Court has issued notices to the Union government and the DGGI and is currently examining the challenge to the Allahabad High Court judgment.
The current status of the case is that it is under hearing by a three-judge Bench in the Supreme Court. The Supreme Court's decision could potentially set a precedent for how CGST penalties are imposed and challenged in the future.
It's important to note that the Goods and Services Tax (GST) is a value-added tax on the supply of goods and services at the national level in India. The GST is designed to eliminate the cascading effect of taxes on the same goods and services, thereby simplifying the tax structure and enhancing tax compliance.
The Supreme Court's examination of the penalty case is expected to take several months, as the court will need to carefully consider all the evidence presented by both parties. The stay on the recovery of the CGST penalty remains temporary until the Supreme Court makes a final decision on the challenge.
In addition to the Supreme Court case, the Allahabad High Court has ordered a Central Bureau of Investigation (CBI) probe in relation to the matter, suggesting ongoing investigations linked to the case.
| Aspect | Details | |-----------------------------------|---------------------------------------------------------------------------------------------------------| | Penalty Amount | ₹273.5 crore GST penalty under Section 122 of CGST Act, 2017 | | Allegation | Circular trading and wrong ITC utilization based on paper invoices without actual supply | | Allahabad High Court Decision | Upheld penalty on May 29, 2025; held proceedings under Section 122 are civil | | Supreme Court Action | Stay on recovery of penalty ordered in August 2025; notice issued to Union and DGGI | | Current Status | Case under hearing by a three-judge Bench in Supreme Court | | Related Investigation | CBI probe ordered by Allahabad High Court |
Thus, the Supreme Court is actively handling the appeal by restraining penalty enforcement and will decide on the legality and nature of the penalty proceedings against Patanjali Ayurved. The outcome of this case could have broader implications for other companies facing similar CGST penalty issues.
The Supreme Court's consideration of the CGST penalty case against Patanjali Ayurved Limited may have a substantial impact on the broader business and finance industry, as it could potentially establish a precedent for future CGST penalty challenges. Furthermore, the ongoing investigation by the Central Bureau of Investigation could extend beyond Patanjali Ayurved and affect other industries engaged in business practices that involve GST and finance.
