Supreme Court Halts ₹273.5 Crore GST Penalty Notice Against Patanjali Ayurved

In a major relief to Patanjali Ayurved, the Supreme Court of India has stayed the recovery of a ₹273.5 crore GST penalty imposed by the Directorate General of GST Intelligence (DGGI). The company, co-founded by yoga guru Baba Ramdev, had challenged the penalty notice issued under Section 122 of the Central Goods and Services Tax Act.

A bench comprising Justices P.S. Narasimha and A.S. Chandurkar issued notices to the Union government and the DGGI, ordering that the penalty recovery be paused until further hearings. The court will also review the Allahabad High Court ruling that had upheld the penalty.

Case Background

The case began when DGGI alleged that Patanjali engaged in suspicious input tax credit claims and issued fake invoices without actual supply of goods through its suppliers in Uttarakhand, Haryana, and Maharashtra. These alleged transactions were linked to the tax period from April 2018 to March 2022.

On 19 April 2024, DGGI issued a show-cause notice proposing penalties worth ₹273.5 crore under Section 122, which penalises GST violations including fake invoicing, even if no tax is ultimately due. A separate tax demand under Section 74—which deals with recovery of unpaid taxes in fraud cases—was also raised.

Partial Relief Earlier

In January 2025, authorities dropped the Section 74 demand for Patanjali’s Uttarakhand unit after finding that the transactions were genuine, sales were higher than purchases, and input tax credit had been properly passed on. However, the Section 122 penalty was maintained.

Legal Battle

Patanjali argued that penalties under Section 122 are quasi-criminal in nature and cannot be imposed once the main tax demand is cancelled. The Allahabad High Court, in its 29 May 2025 judgment, rejected this plea, ruling that such penalties are civil in nature and can be imposed independently by GST officers.

Challenging this verdict, Patanjali approached the Supreme Court, claiming it was unjust to continue the penalty when the primary tax case had been dropped.

Supreme Court Decision

The apex court has now granted interim relief by staying the penalty notice, allowing the matter to be fully argued before a final decision is made.

This development marks another high-profile legal turn for the consumer goods giant, which has been under regulatory scrutiny in recent years

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