Security from certain class of dealers.

12. (1) Where it appears to the authority to whom an application is made under section 11 to be necessary so to do for the proper realisation of the tax payable or for the proper custody and use of any forms referred to in this Act or the rules made thereunder which are printed under the authority of the State Government or are required to be authenticated by any authority under this Act before use, he may, by an order in writing and for reasons to be recorded therein, impose as a condition for the issue of a certificate of registration, a requirement that the dealer shall furnish in the prescribed manner and within such time as may be specified in the order such security as may be so specified, for all or any of the purposes of this Act.

(2) Where it appears to the assessing authority to be necessary so to do for the proper realisation of tax payable under this Act or for the proper custody and use of the forms referred to in sub-section (1), he may, at any time while such certificate is in force, by an order in writing and for reasons to be recorded therein, require the dealer, to whom the certificate has been granted, to furnish within such time as may be specified in the order and in the prescribed manner such security or, if the dealer has already furnished any security in pursuance of an order under this sub-section or sub-section (1), such additional security, as may be specified in the order, for all or any of the aforesaid purposes.

(3) No dealer shall be required to furnish a security under sub-section (1) or sub-section (2) by the authority referred to therein, unless he has been given a reasonable opportunity of being heard and the amount of security that may be required to be furnished by any dealer under either of the aforesaid sub-sections or the aggregate of the amount of such security and the amount of additional security that may be required to be furnished by any dealer under sub-section (2), shall in no case exceed the tax payable, in accordance with the estimate of such authority, by the dealer for the year in which such security or, as the case may be, additional security is required to be furnished.

(4) Where the security furnished by a dealer under sub-section (1) or sub-section (2) is in the form of a surety bond and the surety becomes insolvent or is otherwise incapacitated or dies or withdraws, the dealer shall, within thirty days of the occurrence of any of the aforesaid events, inform the authority granting the certificate of registration and shall within ninety days of such occurrence furnish a fresh surety bond or furnish in the prescribed manner other security for the amount of the bond.

(5) The assessing authority may, by order and for good and sufficient cause, forfeit the whole or any part of the security furnished by a dealer –

(a) for realising any amount payable by the dealer under this Act; or

(b) if the dealer is found to have misused any of the forms referred to in sub-section (1) or to have failed to keep them in proper custody or to have failed to furnish information in respect of their use or surrender them as prescribed: Provided that no order shall be passed under this sub-section without giving the dealer a reasonable opportunity of being heard.

(6) Where by reason of an order under sub-section (5), the security furnished by any dealer is rendered insufficient, he shall make up the deficiency in such manner and within such time, as may be prescribed.

(7) If a dealer fails to comply, with an order under sub-section (1) or sub-section (2), or with the provisions of  sub-section (4) or sub-section (6), the prescribed authority, may, after affording the dealer a reasonable opportunity of being heard, order –

(a) that no form referred to in sub-section (1) shall be issued to him or authenticated until the dealer has complied with such orders or such provisions, as the case may be; or

(b) the rejection of the application for registration, or if the dealer is already registered under this Act, cancellation of his registration certificate, as the case may be, and in the event of rejection of application for registration, the dealer shall be deemed to have failed to apply for registration for the purposes of section 16.