Additional security demand must rest on disclosed material and fair hearing; a vague trade tax notice was set aside.

A demand for additional security under the U.P. Trade Tax Act was held unsustainable where the notice did not disclose the material relied on, the existing security already furnished, the probable tax liability, or the basis for fixing the additional security. Because such an order adversely affects the dealer, a meaningful opportunity of hearing was required before action could be taken. The vague and unreasoned notice-cum-order prevented an effective representation and was therefore illegal. The impugned demand was set aside, while the assessing officer was left free to proceed afresh in accordance with law if necessary.

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Issues: Whether the notice-cum-order directing the dealer to furnish additional security under section 8-C of the U.P. Trade Tax Act, 1948 was lawful and sustainable.

Analysis: Additional security could be demanded only where necessary for proper realisation of tax, penalty or other dues, or for custody or use of statutory forms. An order of this nature affects the dealer adversely and therefore must be preceded by an effective opportunity of hearing. The impugned notice was held to be vague because it did not set out the specific material from the records or investigation on which the demand was based, and it did not disclose the existing security already furnished, the probable tax liability, or the basis for fixing additional security at Rs. 20 lakhs in the form of a bank guarantee. The absence of such particulars prevented an effective representation and rendered the action unsustainable.

Conclusion: The notice-cum-order was illegal and could not be sustained.

Final Conclusion: The writ petition succeeded, the impugned demand for additional security was set aside, and the assessing officer was left free to proceed afresh in accordance with law if necessary.

Ratio Decidendi: A demand for additional security under the trade tax law must be founded on disclosed material and preceded by a meaningful opportunity of hearing; a vague and unreasoned order affecting the dealer's rights is unsustainable.

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