WP(C) 8047/2004 BEFORE THE HON’BLE MR. JUSTICE HRISHIKESH ROY Heard Mr. A. Todi, learned Counsel appearing for the petitioner. Mr. R. Dubey, the appointed Counsel of the Finance Department represents the respondents. 2.1 The petitioner company is dealing in Indian Made Foreign Liquor (IMFL) and Beer and for its business, it is registered under the Assam General S ales Tax Act, 1993 (hereinafter referred to as the AGST Act ) and the Central S ales Tax Act, 1993 (hereinafter referred to as the CST Act ), with the Superint endent of Taxes, Unit-C, Guwahati. The petitioner has submitted its up to date R eturns under the AGST and CST Act and the assessment is complete under both the Acts for the previous years and the demanded tax has also been paid by the asses see. 2.2 The challenge here is to the order of the Superintendent of Taxe s whereby additional security has been assessed against the dealer and proceedin g is initiated under Section 7 of the Bengal Public Demand Recovery Act (hereina fter referred to as the Recovery Act ) by the Bakijai Officer, to realize the a ssessed additional security of Rs.3.00 lac, as a recoverable revenue of the Stat e. 3.1 Mr. A. Todi, learned Counsel contends that at the time of regist ration of the petitioner, the then stipulated security was deposited and since t he dealer has always paid their tax on due time, there is no justification for d emanding additional security from the petitioner. 3.2 The learned Counsel submits that assessment of additional securi ty has to be preceded by affording a reasonable opportunity and upon reasons to be recorded in writing and without disclosing any reason to the affected dealer, they can’t be subjected to additional security. 3.3 Mr. Todi further submits that even assuming that some additional security can be levied, the amount can’t be arbitrarily fixed and the additiona l security can’t exceed the tax paid in the previous years or the tax anticipate d to be payable, for the next year. 3.4 Referring to the nature of the IMFL business, the learned Counse l points out that the liquor business is carried out under strict control and su pervision of the Excise Department of the Government where there is little scope for tax evasion and in the absence of any allegation of misuse of statutory for ms or delay in payment of tax, additional security can’t be realized from a law abiding assessee. 4. The learned Counsel for the Finance Department Mr. R. Dubey on t he other hand contends that the impugned action was preceded by a Show-Cause-Not ice dated 13.11.2003 and therefore complaint can’t now made that the assessee wa s not given an opportunity, before demand of additional security. 5.1 Section 15 of the AGST Act permits the Assessing Officer to dema nd additional security to satisfy the twin objective of (a) timely payment of ta x and (b) for proper use and safe custody of furnished declaration or forms requ ired to be furnished under Sub-Section (2) of Section 10 of the AGST Act. That apart, deposit of additional security can be ordered only for reasons to be reco rded in writing and that too after giving an opportunity of hearing to the affec ted dealer. 5.2 For ready reference Section 15(1) (a) & (b) of the AGST Act is e xtracted hereinbelow : 15.(1)Subject to any rule framed in this behalf the Assessing Officer may, as a condition of the grant of registration to a dealer or at any time afte r such grant, for reasons to be recorded in writing and giving the dealer an opp ortunity of being heard, require him to furnish in the prescribed manner and wit hin the time specified by him such security or such additional security as may b e considered necessary - (a) for the purpose and timely payment of the amount of any tax or other sum payable under this Act; or (b) for the proper use and safe custody of any declaration f urnished or any form prescribed under sub-section(2) of section 10 supplied unde r this Act. 6. But a perusal of the Show-Cause-Notice issued to the assessee re veals that, no reasons were recorded in the notice by the Assessing Officer whil e making the impugned demand for furnishing additional security. Even in the ass essment order, reasons are conspicuous by their absence. 7. In the present case, the reply given by the assessee that they a re regularly paying their dues and no tax remains unpaid, was not at all conside red by the Assessing Officer, although additional security can be realized only for the purpose of ensuring timely payment of tax or for safe custody of the dec laration or forms furnished by the assessee. But conspicuously, neither in the s how-cause-notice nor in the assessment order, any default of the assessee was in dicated, to justify demand of additional security. In this circumstances, it has to be declared that the impugned demand of additional security is unlawful, as the pre-conditions under Section 15 (1) (a) & (b) are not satisfied in the prese nt case. 8.1 That apart, it must also be noted that the amount of Rs.3.00 lac has been arbitrarily stipulated as additional security although under Rule 24 o f the Assam General Sales Tax Rules, 1993 (hereinafter referred to as the AGST Rules ), it is clearly prescribed that additional security can’t exceed the anti cipated tax or the tax paid in the previous years. The tax liability of the asse ssee in this case, never exceeded Rs.20,000/- in the previous years and therefor e the stipulated amount of Rs.3.00 lac, has no nexus with the objective prescrib ed under Section 15 of the AGST Act and is far in excess of the additional secur ity, realizable under Rule 24(1) of the AGST Rules. 8.2 For ready reference Rule 24(1) of the AGST Rules is extracted he reinbelow : 24(1) Where the Assessing Officer is of the opinion that a dea ler who has been registered or has applied for registration or for renewal of re gistration should furnish security or additional security for the proper payment of tax payable by him, the said officer may direct him in writing, to furnish w ithin such time as may be specified by such officer, security for an amount not exceeding the amount equivalent to tax anticipated to be payable in a year or pa id in any previous year. For the purpose of determining the amount of security, the Assessing Officer shall take into account the taxable turnover of the dealer , if any, at the time of such determination, the nature of goods dealt in by him and such other factors as may in the opinion of the said officer assist him in making a proper determination : Provided that the Assessing Officer shall have power to demand at any ti me additional security if he has reason to believe that the security fixed was t oo low, or for any other reasons to be recorded in writing. 9. When the petitioner was initially registered as a dealer under t he AGST Act, the security was already recovered and considering the word may i n Sub-Section (1) of the Section 15 of the AGST Act, only a discretionary power to demand additional security is given to the Assessing Officer. This discretion ary power can’t be whimsically exercised and the discretion so vested, must be e xercised reasonably and to meet the twin objective(s) under Sub-Clause(a) & (b) of Section 15(1) of the AGST Act and additional security can’t be demanded on th e ipse dixit of the Assessing Officer. 10. For demanding additional security, the Assessing Officer must sa tisfy itself that the revenue needs to be safeguarded for timely realization of tax and/or for proper custody and use of the forms issued to the assessee. Cogen t materials must also be available for deriving such satisfaction and the materi als must be relevant to show the assessee to be defaulting in timely payment of tax or misuse of the forms. But for an unblemished dealer who deposits his tax o n time and there is no adverse records of any misuse of forms, additional securi ty can’t be demanded on the whims of the Assessing Officer. When additional secu rity is demanded of a dealer who has no adverse record of default, it is an abus e of discretionary power conferred under Section 15(1) of the AGST Act. 11. The authority in the present case has demanded additional securi ty without recording any reasons for such demand and therefore such shows-cause- notice can hardly satisfy the requirement of giving a reasonable opportunity to the dealer, as prescribed under Section 15(1) of the AGST Act. When reasons for the proposed action is not disclosed, what reply can be expected to be given by dealer. Opportunity to show cause can’t be an empty formality and in my view, th e non-disclosure of reasons vitiates the impugned order and the subsequent recov ery proceeding, since they neither satisfy the statutory requirement of the AGST Act and the Rules nor the principles of natural justice. 12. For the foregoing reasons, the impugned demand of additional sec urity and the consequent recovery proceeding under the Bengal Public Demand Reco very Act are interfered with and quashed. The case stands allowed accordingly wi thout any order of cost.