Patanjali Ayurved Faces Setback as Allahabad HC Rejects Rs. 273.5 Crore GST Penalty Appeal

On Tuesday, 3 June 2025, the Allahabad High Court dismissed Patanjali Ayurved Limited’s appeal against a GST penalty of Rs. 273.50 crore, according to reports.

A high court bench of Justices Shekhar B. Saraf and Vipin Chandra Dixit rejected the company’s argument that such penalties involve criminal charges and can only be imposed following a criminal trial.

The judicial bench, according to the reports, said, “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 court noticed that, as per Section 122 of the GST Act, penalties can be imposed on a firm by the tax authorities via civil proceedings without requiring criminal court trials.

Patanjali Foods, which is a separate company but related to Patanjali Ayurved, is listed on the Indian stock market. On Tuesday, its share price was Rs. 1,690.20, which is 0.44% lower than its previous closing price of Rs. 1,697.65.

GST Notice Received by Patanjali Ayurved

The Directorate General of GST Intelligence (DGGI) in Ghaziabad issued a show cause notice to Patanjali Ayurved on 19 April 2024. The notice proposed a penalty of Rs. 273.51 crore under various provisions of the GST Act.

In an order dated 10 January 2025, the DGGI withdrew tax demands under Section 74 after determining that Patanjali had sold greater quantities of goods than it had officially purchased. As a result, the input tax credit (ITC) claimed was found to have been passed on appropriately.

The DGGI stated, “For all the commodities, the quantities sold were always more than the quantities purchased from the suppliers, thereby making the observation that all the ITC that was availed in the impugned goods was further passed on by the petitioner.”

Even after the tax demand was dropped, authorities continued with penalty proceedings under Section 122, leading Patanjali to take the matter to court. The court, however, upheld the continuation of these proceedings and dismissed the appeal.

Patanjali Ayurved has three factories located in Haridwar, Sonipat, and Ahmednagar. The company was reportedly being investigated after authorities received information about suspicious business activities, especially involving high use of input tax credit (ITC).

The investigation found that Patanjali was likely playing a central role in a type of fraud where fake tax invoices were exchanged without any real goods being sold, which is known as circular trading.

As per the reports, Patanjali Foods Limited rejected the reports that on Sunday, 1 June 2025, notice was received by Patanjali Ayurved Limited from the Ministry of Corporate Affairs. Also stated that no investigation was performed on the Patanjali Ayurved.

In an official statement, the company clarified, “We may clarify that Patanjali Ayurved Limited has not received any communication from the Ministry of Corporate Affairs (‘MCA’) for the proposed investigation by MCA as appearing in mainstream media.”