Provisional bank account attachment under VAT Act set aside, while minimum balance safeguard was retained pending assessment.

A Gujarat HC dealt with the provisional attachment of a bank account under the VAT Act based on a prima facie view that purchases were not genuine and tax may have been evaded while assessment was still pending. The Court found interference justified because the attachment was disproportionate in light of the department's own estimated principal tax exposure and the account was already subject to a minimum balance condition. The attachment order was set aside, but the existing requirement to maintain an unencumbered minimum balance of Rs. 25 lakhs was left unchanged pending completion of assessment or reassessment.

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Issues: Whether the attachment of the petitioner's bank account under section 45(1) of the VAT Act was justified and whether the condition requiring maintenance of a minimum balance of Rs. 25 lakhs deserved modification.

Analysis: The attachment had been ordered on a prima facie view that the petitioner's purchases were not genuine and that tax had possibly been evaded, but the assessment proceedings were still pending. The Court noted that even on the department's own computation, the possible principal tax liability was about Rs. 33 lakhs, besides interest and penalty, and that the account had already been operating with a minimum balance condition of Rs. 25 lakhs. In these circumstances, the impugned attachment order required interference, while the existing balance condition was considered adequate and did not call for enhancement.

Conclusion: The attachment order was set aside, but the petitioner was directed to continue maintaining an unencumbered minimum balance of Rs. 25 lakhs in the bank account till completion of assessment or reassessment for the relevant years.

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