Restoration of Suspended Registration and Stay on Recovery (Section 29/79)

Facts

The Action: The GST Department suspended the Petitioner’s registration under Section 29 following the issuance of a Show Cause Notice (SCN).
Consequential Measures: Along with the suspension, the Department issued a recovery notice and provisionally attached the Petitioner’s bank account to secure potential tax dues.
The Legal Challenge: The Petitioner filed a writ petition arguing that the suspension was arbitrary and contrary to settled judicial precedents (from both the High Court and the Supreme Court) regarding the “due process” of law.
Revenue’s U-Turn: During the court proceedings, the Revenue made a statement that the suspension would be withdrawn immediately and the registration would be restored to operational status.

Decision

The Court ruled in favor of the Assessee, recording the Revenue’s statement and providing protective directions:

Immediate Restoration: The Court accepted the Revenue’s statement, and the GST registration was ordered to be forthwith restored and made functional.
Right to be Heard: The Court emphasized that while the registration is restored, the underlying SCN (which triggered the suspension) remains valid. The Petitioner must be afforded a fair hearing opportunity to contest the allegations in that SCN before any final order is passed.
Stay on Recovery: Critically, the Court held that the recovery notice could not be acted upon. Recovery proceedings under Section 79 cannot be initiated until an “appropriate order” (an adjudication order determining the actual tax liability) is passed in accordance with the law.
Account Attachment: By implication, if the suspension is withdrawn and the recovery notice is stayed, the basis for the provisional attachment of the bank account also weakens, pending the final adjudication.

Key Takeaways

Suspension is Not Termination: Suspension is a temporary measure. If the Department realizes the suspension was procedurally flawed or lacks a strong legal footing, they often withdraw it during writ proceedings to avoid an adverse judgment.
No Recovery Without Adjudication: This is a vital protection for taxpayers. The Revenue cannot “jump the gun” by initiating recovery actions (like attaching accounts or issuing notices to debtors) based on a mere SCN or a suspended registration. A final demand must be crystallized first.
Operational Continuity: Restoring the registration allows the taxpayer to continue their business, file returns, and generate e-way bills, which is essential for them to earn the revenue needed to pay any eventual tax liability.
Section 79 Safeguards: Section 79 (Recovery of Tax) is a post-adjudication power. Attempting to use it as a pre-adjudication pressure tactic is a jurisdictional error that High Courts will routinely correct.

HIGH COURT OF BOMBAY

Bi-Chem India (P.) Ltd.

Union of India^*

G. S. KULKARNI and Aarti Sathe, JJ.

WRIT PETITION (L) NO. 7331 OF 2026

MARCH 11, 2026

Abhishek A. Rastogi, Ms. Pooja M. Rastogi, Ms. Meenal Songire, Ms. Aarya More and Chayank Bohra, Advs. for the Petitioner. Amar Mishra, AGP and Sanjay Sonawane, Asstt. Commissioner for the Respondent.

ORDER

1. This Petition under Article 226 of the Constitution of India is filed praying for the following substantive reliefs:

(A)

Declare that the impugned action of the Respondent No. 3 in issuing the Impugned SCN dated 18.02.2026, annexed hereto as Exhibit “A”, is perverse, arbitrary, and violative of the principles of natural justice; issued without due application of mind; ultra vires Section 29 of the CGST Act read with Rules 21 and 21A of the CGST Rules, violative of the fundamental rights guaranteed under Articles 14, 19(1)(g), and 21 of the Constitution of India;

(B)

Declare that the impugned action of the Respondent No. 4 in issuing the Impugned Recovery Notice and the Impugned Provisional Attachment Notice dated 03.02.2026, annexed hereto as Exhibit “B” and Exhibit “C” respectively, is arbitrary and passed without due application of mind; ultra vires Section 83 of the CGST Act; contrary to the principles of judicial discipline; is in contravention of the binding guidelines prescribed by the Hon’ble Supreme Court in Radha Krishan (supra); and wholly without and or in excess of jurisdiction.

(C)

Issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioner case and after going into the validity and legality thereof quash and set aside the Impugned SCN dated 18.02.2026, Impugned Recovery Notice and Impugned Provisional Attachment Notice dated 03.02.2026 passed by the Respondent No. 3 and 4 (Exhibit “A”, “B” & “C”);

(D)

Issue a Writ of Mandamus or a writ in the nature of Mandamus or any other writ, order or direction under Article 226 of the Constitution of India, directing the Respondent No. 3 & 4 to immediately restore the registration of the Petitioner suspended by the Respondents in order to continuance of the business;

(E)

Issue a Writ of Mandamus or a writ in the nature of Mandamus, or any other appropriate writ, order or direction under Article 226 of the Constitution of India, directing Respondent Nos. 4 to forthwith defreeze the bank accounts of the Petitioner, which have been provisionally attached by Respondent No. 4 under Section 83 of the CGST Act.

(F)

Issue a Writ of Mandamus, or a Writ in the nature of Mandamus, or any other appropriate Writ, Order, or directions, restraining Respondents, their officers, and subordinates from taking any action or coercive steps, in any manner, in consequence of or in relation to the Impugned SCN dated 18.02.2026; Impugned Recovery Notice and Impugned Provisional Attachment Notice dated 03.02.2026 passed by the Respondent No. 3 and 4 (Exhibit “A”, “B” & “C”), during the pendency of the present Writ Petition.

(G)

Pending the hearing and final disposal of the present Petition, stay the operation and effect of the Impugned SCN dated 18.02.2026, the Impugned Recovery Notice, and the Impugned Provisional Attachment Notice dated 03.02.2026, annexed hereto as Exhibit “A”, Exhibit “B” and Exhibit “C” respectively to the present Petition.

2. Mr. Rastogi, learned counsel for the Petitioner, made elaborate submissions, inter alia contending that the impugned action of suspending the Petitioner’s registration under the CGST/SGST Act could not have been taken in the facts and circumstances of the present case. It is submitted that such action would be contrary to several decisions of this Court as well as of the Supreme Court.

3. After the proceedings were heard for some time, learned Counsel for the Revenue fairly stated that instructions can be taken as to whether the lawful procedure had been followed for taking any action with regard to the cancellation of the Petitioner’s registration, we accordingly passed over the proceeding to be called out at 3 p.m.

4. In the second session, on instructions from Mr. Sonawane, Assistant Commissioner, who is stated to be present in Court, Mr. Amar Mishra, learned AGP submitted that the suspension of the Petitioner’s registration shall forthwith stand withdrawn, and the registration of the Petitioner shall be restored and made operational.

5. Mr. Amar Mishra has further submitted that, in so far as any action is to be taken against the Petitioner, an opportunity of hearing shall be granted to the Petitioner on the Show Cause Notice dated 18 February 2026, and thereafter, by following the due process of law, appropriate action as permissible in law shall be taken.

6. In this view of the matter, a similar position would be required to be adopted by the Respondent-Revenue in so far as the recovery notice dated 3rd February 2026 is concerned. The lawful procedure would be required to be followed and an order in accordance with law be passed in regard to any recovery, after verifying the record and considering the contentions which the Petitioner intends to urge.

7. In these circumstances, further adjudication of the matter is not called for. The Petition is accordingly disposed of in terms of the following order:

(i)

The statement made on behalf of the Respondent-Revenue that the impugned suspension of the Petitioner’s registration stands withdrawn, is accepted.

(ii)

As a consequence of the aforesaid statement, the registration of the Petitioner shall forthwith stand restored.

(iii)

The Petitioner shall be granted an opportunity of hearing on the Show Cause Notice dated 18th February 2026. The Petitioner shall submit all materials and documents intended to be relied upon within a period of 10 days from today. The hearing shall take place within a period of 7 days from the date of submission of such documents, and an order on the show cause notice shall be passed in accordance with law within a period of 15 days from the date of hearing.

(iv)

Insofar as the impugned recovery notice dated 3rd February 2026 is concerned, the same shall not be acted upon. The competent officer shall follow the due procedure of law and pass an appropriate order in the event any recovery is proposed to be proceeded against the Petitioner.

(v)

All contentions of the parties in the proceedings are expressly kept open.

(vi)

The Petition stands disposed of in the aforesaid terms. No order as to costs.