Security demand at registration upheld where objective reasons and reasonableness limit discretion; inquiry rule also survived natural justice challenge.

Section 7(4a) of the Bengal Finance (Sales Tax) Act, 1941 was upheld as a valid registration-stage security provision because the demand was confined by objective limits: good or sufficient reasons and a requirement of reasonableness. The expression "tax payable" was construed to include tax that would become payable, not only tax already assessed and demanded, so the section was workable at the registration stage. Rule 6 of the Bengal Sales Tax Rules, 1941 was also upheld, as the inquiry it contemplated was verification-based and not a judicial trial; natural justice was satisfied so long as adverse material could be answered. The substantive challenges therefore failed.

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Issues: (i) whether the power to demand security under section 7(4a) of the Bengal Finance (Sales Tax) Act, 1941, was unconstitutional as conferring arbitrary and unfettered discretion in violation of Article 19(1)(g) of the Constitution of India; (ii) whether the expression "tax payable" in section 7(4a) meant tax already assessed and demanded, making the provision inoperative at the stage of registration; and (iii) whether rule 6 of the Bengal Sales Tax Rules, 1941, was bad for want of compliance with natural justice.

Issue (i): whether the power to demand security under section 7(4a) of the Bengal Finance (Sales Tax) Act, 1941, was unconstitutional as conferring arbitrary and unfettered discretion in violation of Article 19(1)(g) of the Constitution of India.

Analysis: The power to demand security was held to be controlled by two express limitations: there must be good or sufficient reasons, and the security demanded must be reasonable. Those requirements were treated as objective and justiciable. The provision was therefore not an uncontrolled power. The Court also held that a taxing statute may legitimately include reasonable safeguards for collection.

Conclusion: The challenge failed. Section 7(4a) was held to be intra vires and not violative of Article 19(1)(g) of the Constitution of India.

Issue (ii): whether the expression "tax payable" in section 7(4a) meant tax already assessed and demanded, making the provision inoperative at the stage of registration.

Analysis: The expression "tax payable" was construed in the context of the registration stage, where assessment and demand notice had not yet occurred. The Court held that the word could not be confined to tax already finally assessed and demanded, because that construction would defeat the section. The comparison with section 11(4a) showed that the legislature used different language when it intended to refer to tax after assessment and the expiry of the date of payment.

Conclusion: The expression was held to mean tax that would become payable, and the section was not unworkable.

Issue (iii): whether rule 6 of the Bengal Sales Tax Rules, 1941, was bad for want of compliance with natural justice.

Analysis: The rule permitting inquiry by the Commercial Tax Officer was construed as a verification process rather than a judicial trial. The Court held that natural justice was not excluded, because if adverse material emerged from the inquiry the dealer had to be given an opportunity to explain it. On the facts, the petitioner had in any event been present during the relevant inquiry and had signed the report.

Conclusion: Rule 6 was held not to violate natural justice and was not invalid.

Final Conclusion: All substantive challenges to the demand of security and to the validity of the registration procedure failed, and the petition was dismissed with the rule discharged.

Ratio Decidendi: A statutory power to demand security at the registration stage is valid where it is confined by objective reasons and a requirement of reasonableness, and procedural inquiry under the registration rules is not invalid merely because it is investigative rather than judicial, provided an opportunity to answer adverse material is available.

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