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Issues: Whether the demand of additional security under the Assam General Sales Tax Act, 1993 and the consequential recovery proceeding were lawful.
Analysis: Additional security could be demanded only for the statutory purposes of securing timely payment of tax or ensuring proper use and safe custody of declarations and forms, and only for reasons recorded in writing after giving the dealer an opportunity of hearing. The notice and assessment order did not disclose any reasons or any default by the dealer, and the dealer's explanation of regular tax compliance was not considered. The amount fixed also exceeded the statutory yardstick under the Rules, which limited security to anticipated tax or tax paid in previous years. The demand was therefore based on an arbitrary exercise of discretion and did not satisfy the statutory conditions or the requirements of natural justice.
Conclusion: The demand of additional security and the consequential recovery proceeding were unlawful and were quashed.
Final Conclusion: The dealer was held entitled to relief against the impugned security demand and recovery action, and the proceeding was set aside without costs.
Ratio Decidendi: A demand for additional security is valid only when the statutory preconditions are satisfied by recorded reasons based on relevant material, and it cannot be imposed arbitrarily or without disclosure of the basis to the dealer.
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