Security demand under sales tax law set aside where past history of a separate firm could not justify fixation of security.

Security under section 8-C(3) of the U.P. Sales Tax Act could not be sustained solely on the past history of an earlier firm with a different legal identity, because that firm was not established as the applicant-firm's legal predecessor for fixing security. The provision requires notice and hearing, and authorises security only to the extent of tax payable on the assessing authority's estimate of turnover for the relevant year. The HC found that the orders below had not properly considered these statutory ingredients, so the Tribunal's sustained demand could not stand and the matter had to be reconsidered afresh under section 8-C(3).

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Issues: Whether the demand of security under section 8-C(3) of the U.P. Sales Tax Act could be sustained against the applicant-firm on the basis of the past history of an earlier firm with different legal identity, and whether the matter required fresh consideration on the statutory ingredients governing such demand.

Analysis: Section 8-C(3) permits demand of security only after giving the dealer an opportunity of being heard and only to the extent of the tax payable on the basis of the assessing authority's estimate of turnover for the relevant assessment year. The demand in the present case was founded substantially on the history of the old firm, but that firm was a separate entity and could not, on the facts found, be treated as the applicant-firm's legal predecessor for the purpose of fixing security. The orders below also did not adequately consider the statutory ingredients relevant to fixation of security under the provision.

Conclusion: The demand of security as sustained by the Tribunal could not stand, and the matter was required to be reconsidered afresh by the Tribunal in accordance with section 8-C(3) of the U.P. Sales Tax Act.

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