Pending tax appeals and partial deposit justified lifting the bank freeze while preserving amounts already recovered.

Pending tax appeals before the Tribunal did not justify continued freezing of the assessee's bank accounts under the Karnataka Value Added Tax Act, 2003, especially after 30% of the demand had already been deposited and the Tribunal had required a bank guarantee for the balance. The Court held that complete attachment or freeze would serve no useful purpose while the substantive appeals remained undecided, so the assessee was allowed to operate its bank accounts and the recovery direction was kept in abeyance for the interregnum. The amount already transferred to the revenue was permitted to remain with it.

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Issues: Whether, pending disposal of the tax appeals before the Tribunal, the authority could continue to freeze the assessee's bank accounts and enforce recovery under Section 45 of the Karnataka Value Added Tax Act, 2003.

Analysis: The appeals against the tax demand were still pending before the Tribunal, and the assessee had already deposited 30% of the demand. The Tribunal had directed furnishing of bank guarantee for the remaining 70%, and on failure to furnish such guarantee, recovery action was initiated under Section 45 of the Karnataka Value Added Tax Act, 2003 by calling upon the bankers to transfer the amounts lying in the accounts. The Court held that complete freezing or attachment of the bank accounts would not serve any purpose in the circumstances, particularly when the substantive appeals were yet to be decided. At the same time, the amount already transferred to the revenue was permitted to remain with it.

Conclusion: The assessee was allowed to operate its bank accounts, the continuing freeze and future operation of the recovery direction were set aside for the interregnum, and the revenue was permitted to retain the amount already recovered.

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