Patanjali Ayurved Ltd. and its subsidiary, Patanjali Foods Ltd., have taken legal action against a recent Delhi High Court order concerning their chyawanprash advertising campaign. The companies have filed an appeal with the Commercial Appellate Division of the Delhi High Court, contesting the interim order issued on July 3.

Advertising Modifications Ordered

The single-judge bench had directed Patanjali to make several changes to their chyawanprash advertisements:

• Remove phrases like "Why settle for ordinary Chyawanprash made with 40 herbs?" from print advertisements.
• Edit television commercial segments that suggested only those with Ayurvedic knowledge could prepare 'original Chyawanprash.'

Dabur's Legal Action

The court order came in response to a lawsuit filed by Dabur, a major player in the chyawanprash market with a 61.60% market share. Dabur alleged that Patanjali's advertisements were disparaging its products.

Patanjali's Defense

Patanjali has argued that its advertisements:

• Only praised its own product without directly referencing Dabur.
• Used the term 'ordinary' which has a neutral connotation.

Dabur's Contentions

Dabur's legal team maintains that Patanjali's advertisements:

• Damage competitor reputation.
• Mislead consumers.

They noted that the advertisement in question was aired approximately 900 times over three days on major TV networks and was also published in the Delhi edition of Dainik Jagran.

Implications for Advertising Practices

This legal battle highlights the fine line between competitive advertising and disparagement in the Ayurvedic products market. The case could set a precedent for how companies in the health and wellness sector frame their marketing messages, especially when making comparisons to competitors.

As the appeal moves forward, both Patanjali and Dabur will likely present further arguments to support their positions. The outcome of this case could have significant implications for advertising practices in the highly competitive Ayurvedic products industry.

In a significant development for Patanjali Ayurved Limited, the Supreme Court has issued a stay order on the recovery of a ₹273.5 crore Goods and Services Tax (GST) penalty imposed on the company. The decision comes as a temporary relief for the ayurvedic products giant amidst an ongoing legal battle over alleged GST violations.

Supreme Court's Intervention

Justices PS Narasimha and AS Chandurkar, presiding over the case, have issued a notice to the Union government and the Directorate General of GST Intelligence (DGGI). The court has directed that the penalty not be enforced until further orders, effectively putting the recovery process on hold.

Background of the Penalty

The controversy stems from allegations made by the DGGI that Patanjali engaged in transactions with entities exhibiting high Input Tax Credit (ITC) utilisation but lacking corresponding income tax records. This pattern raised suspicions of possible circular trading through paper invoices, prompting the GST authorities to take action.

Chronology of Events

Legal Contentions

The case has brought to light several legal points of contention:

1. The continuation of penalty proceedings under Section 122, despite the withdrawal of the main tax demand.
2. The interpretation of Section 122 proceedings as civil in nature by the Allahabad High Court.
3. The jurisdiction of GST officers to impose penalties after withdrawing the main tax demand.

Patanjali's Legal Challenge

Senior Advocate Arvind P Datar, representing Patanjali Ayurved, has challenged the High Court's interpretation. The core of their argument questions the GST officers' authority to impose penalties after the withdrawal of the primary tax demand.

Implications and Next Steps

This stay order from the Supreme Court provides temporary relief to Patanjali Ayurved, preventing the immediate recovery of the substantial penalty. However, it is important to note that this is not a final decision on the merits of the case. The notice issued to the Union government and DGGI indicates that the court will hear arguments from all parties before making a final judgment.

The case raises important questions about the interpretation and application of GST laws, particularly concerning the continuation of penalty proceedings after the withdrawal of primary tax demands. The final verdict could have significant implications for how GST penalties are handled in similar cases across the country.

As the legal proceedings continue, all eyes will be on the Supreme Court for its final decision, which could set a precedent for future GST-related disputes and clarify the scope of GST officers' powers in imposing penalties.