Proportionate security for sales tax registration cannot be used to impose a prohibitory burden on business.

Security demanded as a condition for registration under the Punjab General Sales Tax Act must be proportionate to the dealer's probable tax liability, business nature and turnover. Where the business is newly established, capital and turnover are modest, and the disclosed tax liability is small, an onerous cash security may be arbitrary and disabling rather than regulatory. Past conduct may be considered, but it cannot justify a prohibitory burden that prevents the dealer from carrying on business. The impugned demand of cash security was held excessive and liable to be quashed, with reconsideration directed on the basis of a reasonable security and permissible part-payment under the rules.

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Issues: Whether the demand of cash security of Rs. 50,000 as a condition for grant of registration certificate under section 9 of the Punjab General Sales Tax Act, 1948 was reasonable and legally sustainable.

Analysis: Security under section 9 must bear a reasonable relation to the dealer's probable tax liability, the nature of the business and its turnover. The material on record showed that the petitioner's business was newly established, the declared capital and turnover were modest, and the tax liability disclosed on the first year's working was comparatively small. Though past conduct connected with an earlier concern could be taken into account, it could not justify an onerous security which would disable the firm from carrying on business. The power to insist on security was regulatory and enabling, not prohibitory or disabling, and the amount could be revised upward later if the business expanded.

Conclusion: The demand of cash security of Rs. 50,000 was excessive, arbitrary and not a proper exercise of discretion under section 9; the impugned orders were liable to be quashed and the matter required reconsideration after fixing a reasonable security and permitting part of it to be furnished in the manner allowed by the rules.

Ratio Decidendi: Security imposed as a condition for registration must be proportionate to the dealer's business and potential tax liability, and cannot be used to impose a prohibitory burden that effectively prevents the dealer from carrying on business.

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