Additional security under sales tax registration rules cannot be insisted on when no immediate tax liability exists and circulars bar it.

Additional security under the APGST registration framework may be required to secure tax realisation and control statutory forms, but only with recorded reasons and an opportunity of hearing. Where an assessee was covered by a sales tax deferment scheme and had no immediate tax liability during the relevant period, insisting on further security was not justified. The demand was also inconsistent with binding departmental circulars stating that limited companies should not be compelled to furnish security deposit. The impugned security requirement was therefore treated as unsustainable and invalid.

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Issues: Whether the registering authority was justified in directing the assessee to furnish additional security under section 12 of the Andhra Pradesh General Sales Tax Act, 1957 and rule 28 of the Andhra Pradesh General Sales Tax Rules, 1957 despite the sales tax deferment scheme and the departmental circulars.

Analysis: Section 12(10) empowered the registering authority, at any time while the certificate of registration remained in force, to require additional security for proper realisation of tax and for custody and use of statutory forms, subject to reasons recorded and an opportunity of hearing under section 12(11). Rule 28(15) reflected the same power. However, the assessee had been granted deferment of sales tax for ten years and, on the facts, there was no immediate tax liability during the relevant year. The object of security was to secure prompt payment of tax, and in the absence of present liability the demand for additional security was not justified. The direction also ran contrary to the Commissioner's circulars, which instructed that limited companies registered under the Companies Act, 1956 should not be insisted upon to furnish security deposit, and those circulars were binding on the registering authority.

Conclusion: The demand for additional security was not sustainable and was invalid against the assessee.

Final Conclusion: The impugned proceedings were quashed and the writ petition succeeded.

Ratio Decidendi: A demand for security or additional security under section 12 of the APGST Act and rule 28 cannot be sustained where the assessee has no immediate tax liability and the demand is inconsistent with binding departmental circulars governing the grant of registration security.

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