GST News - Issue of Circular trading and fake invoices by Patanjali's supplier - The Supreme Court stayed recovery of ₹273.5 crore GST penalty on Patanjali, raising the issue of whether penalties under Section 122 can survive once Section 74 tax demands are dropped
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17-Aug-2025 09:38:13
New update: 15 August 2025
The Supreme Court has stayed (halted) the recovery of a ₹273.5 crore Goods and Services Tax (GST) penalty imposed on Patanjali Ayurved Limited by the Directorate General of GST Intelligence (DGGI).
A bench comprising Justices P.S. Narasimha and A.S. Chandurkar issued notices to both the Union Government and the DGGI on Patanjali’s appeal and decided to examine the matter further.
The penalty relates to alleged circular trading and wrongful claims of input tax credit (ITC) involving fake invoices issued by Patanjali’s suppliers in Uttarakhand, Haryana, and Maharashtra for the period between April 2018 and March 2022.
On 19 April 2024, the DGGI issued a show-cause notice under Section 122 of the CGST Act, proposing the ₹273.5 crore penalty. Around January 2025, tax demands under Section 74 (fraud-related tax recovery) were dropped after scrutiny, but the Section 122 penalty proceedings continued.
Patanjali challenged the penalty before the Allahabad High Court, arguing that Section 122 penalties are quasi-criminal and require a judicial trial, and cannot persist after Section 74 proceedings were dropped. The High Court dismissed these arguments, deeming such penalties civil in nature and validly imposed by GST officers without a criminal trial.
Dissatisfied, Patanjali moved the Supreme Court, contesting the imposition of the penalty, the legal scope of Section 122, the powers of GST officers, and whether the penalty should still apply after the Section 74 case was quashed. The Supreme Court’s stay is an interim relief until a full hearing is conducted.
Source: https://www.cnbctv18.com/business/companies/supreme-court-stays-rs-274-crore-gst-penalty-on-patanjali-ayurved-report-19654490.htm
