In an announcement today the BBC Trust's editorial standards committee claimed that certain footage featured in the programme 'Primark: On the Rack', which was broadcast in June 2008, was "more likely than not", not genuine.
The documentary was said to include footage obtained in a Bangalore workshop of three boys carrying out an activity described in the programme as "testing the stitching" on Primark garments.
The ESC said it had examined a "substantial body of evidence", including rushes tapes, emails to the programme team from the freelance journalist who obtained the footage and witness evidence.
As a result it came to the conclusion that "although it was not able to say beyond reasonable doubt, it was more likely than not that the Bangalore footage was not genuine".
"The committee considered that there was not one piece of irrefutable and conclusive evidence which would enable it to say for certain (i.e. beyond reasonable doubt) whether the footage was or was not staged.
"However, the committee was not required to reach a view beyond reasonable doubt in order to determine the appeal."
Following references to specific alleged inconsistencies in the evidence looked at the committee found "there had been a serious breach of the accuracy and fairness editorial guidelines".
Outlining the sanctions facing the BBC as a result, the ESC said it had requested that the BBC Executive considers its position with regard to a Royal Television Society Award it received in 2009 for the programme.
An apology will also be broadcast on BBC One at the beginning or end of a forthcoming Panorama programme and will run on the Panorama website.
The programme must also not be sold or repeated and the BBC Executive will be contacting third parties which may have been sold or supplied with the programme.
"The BBC's investigative journalism is rightly held in very high regard, and for more than 50 years Panorama has made a very significant contribution to that," BBC trustee and chair of the ESC Alison Hastings said in today's report.
"But great investigative journalism must be based on the highest standards of accuracy, and this programme on Primark failed to meet those standards. While it's important to recognise that the programme did find evidence elsewhere that Primark was contravening its own ethical guidelines, there were still serious failings in the making of the programme. The Trust would like to apologise on behalf of the BBC to Primark and to the audience at home for this rare lapse in quality."
A complaint that the BBC editorial guidelines on accountability had been breached by the BBC Executive's Editorial Complaints Unit's (ECU) move not to take into account an expert report by Primark in finalising its decision and by appearing to place the burden on Primark to prove its case, was also upheld in part.
As a result of the findings the BBC Trust has requested that a series of specific issues be addressed, including the need for making and maintaining records and notes as well as effective training of journalists in the field.
The BBC must also ensure it can "stand by the work of non-BBC journalists acting on its behalf, as well as its own journalists", the report added.
In a statement the BBC said it accepts the ruling that there were serious breaches in its editorial procedures.
"Two previous internal BBC reports similarly concluded that one 45-second sequence could not be authenticated. We accept that because of this the sequence should not have been broadcast.
"Because the complaints process has taken some time to resolve, the BBC has already made significant progress in tightening its procedures when it comes to filming in undercover situations.
"As a result of the ruling, the BBC will ensure that all staff involved in the making of the programme – and more generally staff involved in investigative reporting - understand their responsibilities when it comes to authenticating evidence."
Dan McDougall, the freelance journalist named in today's report as working on the documentary, released a statement to say he was "appalled" by the decision.
"I have rarely seen a finding so unjust in outcome, flawed in process and deeply damaging to independent investigative journalism," he added.