Additional security notices under sales tax law need only state the basis for proposal at the show cause stage.

Section 12 of the Andhra Pradesh General Sales Tax Act, read with rule 28, permits additional security to safeguard tax realisation and the proper custody and use of forms. At the show cause stage, the notice need only indicate the basis for proposing additional security; it is not necessary then to establish the sufficiency or final legality of the reasons. The requirement to give the dealer an opportunity of being heard and to record reasons arises before the final order is made. A reference to increased business volume was treated as relevant to the statutory purpose, so the notices were not arbitrary or vague and were not liable to be challenged at that stage.

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Issues: Whether the notices calling upon registered dealers to show cause for furnishing additional security under section 12 of the Andhra Pradesh General Sales Tax Act, 1957 read with rule 28 of the Andhra Pradesh General Sales Tax Rules, 1957 were invalid for want of sufficient reasons or for arbitrariness and vagueness.

Analysis: The power to require additional security under section 12(10) is meant to secure proper realisation of tax and other dues and the proper custody and use of forms. Before an order is made, section 12(11) requires an opportunity of being heard and the authority must record reasons. At the stage of a show cause notice, however, it is enough if the notice indicates the basis on which additional security is proposed. The reference to increased volume of business was not irrelevant to the statutory purpose, and the sufficiency or legality of the reasons was a matter for consideration after objections were filed and an order was passed.

Conclusion: The notices were not invalid or arbitrary at the show cause stage, and the writ petitions were not liable to be admitted.

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