JAY KAY MOTORS Vs. ASSESSING AUTHORITY

JUDGEMENT

(1.) THE petitioner is a partnership firm consisting of Shrimati Brahm Lata Jain and her two sons, Shri Surinder Kumar Jain and Shri Arun Kumar Jain. Shri Arun Kumar Jain is minor and has been admitted to the benefits of the partnership. This firm carries on the business of purchase and sale of spare parts of automobiles, scooters, etc. It applied for a registration certificate under Section 7 of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as the Act) and the Central Sales Tax Act to the Assessing Authority on 4th May, 1971. By order dated 10th June, 1971, respondent I directed the petitioner-firm to deposit a cash security of Rs. 2,50,000. 00 as a condition precedent to the granting of the licence. Against that order, the petitioner filed an appeal before the Deputy Excise and Taxation Commissioner, respondent 2, who accepted the appeal and remanded the case to the Assessing Authority for a fresh decision after affording an opportunity of hearing to the petitioner-firm. After remand, the Assessing Authority passed an order dated 5th August, 1971, directing Shri Surinder Kumar Jain, partner of the firm to furnish a cash security of Rs. 2,50,000. 00 in any of the forms provided in Sub-rules (a), (b) and (c) of Rule 4-A of the Punjab General Sales Tax Rules, 1949, within ten days for grant of registration certificate. Against that order, the petitioner-firm filed an appeal which was dismissed by the Deputy Excise and Taxation Commissioner by order dated 14th September, 1971. The petitioner filed a second appeal before the Sales Tax Tribunal which was decided on 30th November, 1971 and the amount of security deposit was reduced from Rs. 2,50,000. 00 to Rs. 50,000. 00, which was directed to be deposited in cash. The petitioner has challenged the orders of respondents 1 to 3 by means of this petition to which a written statement has been filed by the said respondents.

(2.) THE principal point argued by the learned counsel for the petitioner is that under Section 9 of the Act a reasonable security has to be demanded from a dealer as a condition of the issue of a registration certificate. This Section reads as under : 9. Security from certain class of dealers.-The Commissioner or any officer authorised by him in writing in this behalf, if it appears to him to be necessary so to do for the proper realisation of the tax levied under this Act, may impose, for reasons to be recorded in writing, as a condition of the issue of a registration certificate to a dealer or of the continuance in effect of such a certificate issued to any dealer, a requirement that the dealer shall give security upto an amount and in the manner approved by the Commissioner for the payment of the tax for which he may be or become liable under this Act.

(3.) THIS Section is word for word the same as Section 8a of the Bengal Finance (Sales Tax) Act, 1941, the constitutional validity of which was challenged before their Lordships of the Supreme Court in Nand Lal Raj Kishan v. Commissioner of Sales Tax, Delhi and Anr. [1961] 12 S. T. C. 324 (S. C. ). It was held that the Section was constitutionally valid and while dealing with the contention that there is no limit to the amount which can be demanded as security, their Lordships observed as under : As to the contention that there is no limit to the amount which can be demanded as security, it is only necessary to point out that the amount that can be demanded as security must have relation to the payment of the tax for which the person concerned may be or become liable under the Act. The amount must depend on the nature of the business, its turnover and the amount of tax payable thereon by the person concerned. Furthermore, the order of the Commissioner under Section 8a is subject to revision by the Chief Commissioner and if an arbitrary or unreasonable amount is demanded, the order of the Commissioner will be subject to scrutiny by the Chief Commissioner. We do not think that even in the matter of the amount of security, the power of the Commissioner is unlimited or unrestricted.