Provisional tax attachment requires real necessity, and existing bank guarantee can justify release of goods pending assessment.

Provisional attachment under Section 45(1) of the VAT Act is an extraordinary protective measure and must be used cautiously on material showing real necessity to safeguard revenue. On the facts, the petitioner showed a prima facie case that bonded-warehouse sales may not attract VAT and that the import and sale document descriptions did not, on their face, establish a material mismatch in the goods. Because assessment remained pending, no final tax finding was made, but the existing bank guarantee substantially secured the revenue. Further attachment was therefore not warranted, and the petitioner was allowed to deal with the goods while keeping the guarantee alive until assessment.

---

---

Issues: Whether provisional attachment of the petitioner's goods under Section 45(1) of the VAT Act was justified and whether further attachment could continue when the petitioner had furnished bank guarantee coverage.

Analysis: The power under Section 45(1) is an extraordinary protective measure, comparable to attachment before judgment, and must be exercised cautiously on material showing necessity to safeguard revenue. On the materials before it, the petitioner had made out a prima facie case that the bonded-warehouse sales may not attract VAT and that the description differences in the import and sale documents did not, on the face of it, establish a material mismatch in the goods. At the same time, the assessment was still pending, so no final finding on tax liability was recorded. Since the petitioner had already furnished bank guarantee for Rs. 30 crores, the revenue interest stood substantially secured.

Conclusion: Further attachment was not warranted, and the petitioner was permitted to deal with the goods, subject to maintaining the bank guarantee alive until assessment.

Final Conclusion: The challenge to continued attachment succeeded only to a limited extent, resulting in release of the goods against existing security while leaving the assessment proceedings open.

Ratio Decidendi: Provisional attachment in tax matters can be sustained only when supported by material showing real necessity to protect the revenue, and it should not be continued beyond the extent required where adequate security has already been furnished.

---