Scientology's Celebrity Centre and its bookshop in Paris, the two branches of its French operations, were ordered to pay €600,000 in fines for preying financially on its followers in the 1990s.
Alain Rosenberg, the French leader of a movement best known for its Hollywood followers Tom Cruise and John Travolta, was handed a two-year suspended jail sentence and fined €30,000 on the same charge.
'Religious freedom is in danger in this country,' said Celebrity Centre spokesman Eric Roux after the verdict, urging France to 'recognise the legality of the Church of Scientology.'
A lawyer for Scientology's French operations, Patrick Maisonneuve, said he would appeal, but added that 'the most important thing is that this association can continue to exercise its activities.'
Paris prosecutors originally asked the court to order the Celebrity Centre and bookshop to be dismantled.
But last month the French courts were alerted to a legal change voted in by parliament in May, the month the trial opened, which bars judges from dissolving an organisation convicted of fraud.
Although the change has since been dropped, this was not retrospective and thus Scientology was protected from an outright ban in the ongoing case, forcing the court to downgrade the sentence.
'A ban would run the risk of its activities being pursued outside of any legal framework,' said judge Sophie-Helene Chateau, suggesting that the group may have gone underground.
Founded in 1954 by US science-fiction writer L Ron Hubbard, the Church of Scientology is recognised as a religion in the US and claims a worldwide membership of 12 million.
But European officials in Germany, Greece, Russia and elsewhere have accused the movement of tricking its members out of large sums, and in 1995 it was classified as a cult in France, where it claims 45,000 followers.
The Church of Scientology is in the courts in Paris for the second time in six years, and the French have prosecuted several individual Scientologists since 1978.
Complaints
The latest case follows a complaint from two women, one of whom says she was manipulated into handing over €20,000 for costly products, including an 'electrometer' to measure mental energy.
She was approached in the street by a Scientologist in 1998 who offered a free personality test, at a time when she was feeling psychologically fragile.
After being told her test results were poor, the woman was sold a series of life-improvement courses, vitamins and other products she could ill afford, landing her in debt.
A second plaintiff alleges she was forced by her Scientologist employer to undergo testing and enrol in courses in 1998. When she refused she was fired.
The head of France's inter-ministerial body on cults, Georges Fenech, said he was sorry judges were prevented from tougher action.
'I strongly regret that the law was changed discreetly during the trial, just before the trial, without anyone knowing,' he told France 24 television.
'But I think the provision has been reinstated by parliament, so there could be a ban in future if they offend again.'
Critics of Scientology have accused Scientologists of 'infiltrating' the National Assembly to lobby for the legal change.
Outraged by the allegation, French Scientology's lawyer had asked the court to reopen the case to clear her clients of suspicion.
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SIC: RTÉ