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Issues: Whether the demand and reduction of security under section 26 of the West Bengal Value Added Tax Act, 2003 read with rule 195 of the West Bengal Value Added Tax Rules, 2005 was valid when the dealer had no tax default, no loss of way-bills or declaration forms, and the recorded reasons did not disclose good and sufficient grounds.
Analysis: Section 26 of the West Bengal Value Added Tax Act, 2003 read with rule 195 of the West Bengal Value Added Tax Rules, 2005 permits demand of security only for good and sufficient reasons. The power is discretionary, but its exercise must rest on objective facts and recorded reasons showing a rational basis. The recorded grounds, including alleged potential tax liability, absence of immovable property, unsound financial condition, rent-free accommodation, and supposed consent, were not supported by the material on record. The dealer had filed returns regularly, there was no default, and no misuse or loss of way-bills or declaration forms was shown. The reasons recorded therefore lacked the necessary factual foundation and nexus with the statutory purpose.
Conclusion: The security demand was invalid and could not be sustained. The orders were set aside and the petition was allowed.
Ratio Decidendi: Security under section 26 of the West Bengal Value Added Tax Act, 2003 can be demanded only on recorded good and sufficient reasons supported by objective material, and not on conjecture or unsupported apprehension.
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