Security demand under trade tax law must be rational; bank guarantee cannot be insisted on without cogent reasons.

Under section 10(8) of the U.P. Trade Tax Act, the Assessing Authority's discretion to demand adequate security is limited by rational and non-arbitrary considerations. Cash security or a bank guarantee cannot be insisted upon as a matter of whim; reasons should ordinarily support such a demand, especially where stronger protection of revenue is claimed. A bank guarantee is justified only on cogent grounds, while cash security may be appropriate where the assessee is shown to be wholly untrustworthy. On the facts described, the assessee was an established and continuing taxpayer, so insisting on a bank guarantee was not justified.

---

---

Issues: Whether, under section 10(8) of the U.P. Trade Tax Act, 1948, the Assessing Authority could insist upon cash or bank guarantee as security, and whether such demand was justified on the facts.

Analysis: The provision confers discretion on the Assessing Authority to demand adequate security to its satisfaction, but that discretion is not unbridled and cannot be exercised arbitrarily or whimsically. The choice of security must rest on logical considerations, and reasons should ordinarily be indicated, particularly where cash security or bank guarantee is insisted upon. A bank guarantee may be justified only where cogent reasons show a need for stronger protection of revenue, while cash security may be warranted where the assessee is wholly untrustworthy. In the present case, the assessee was an established and continuing tax payer, and no sufficient basis existed for requiring bank guarantee.

Conclusion: The demand for bank guarantee was not justified. The security to be furnished under section 10(8) was directed to be acceptable to the Assessing Authority, but it could not be cash or bank guarantee.

Ratio Decidendi: Discretion to demand security under section 10(8) must be exercised on rational and non-arbitrary considerations, and a bank guarantee cannot be insisted upon without cogent reasons showing its necessity.

---