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1979 (10) TMI 209 - HC - VAT and Sales Tax
Issues:
Challenge to appellate order directing to furnish security under the Rajasthan Sales Tax Act, 1954. Analysis: The petitioner, a registered dealer under the Rajasthan Sales Tax Act, challenged an appellate order directing the furnishing of security of Rs. 25 lacs under section 6(7)(i) of the Act. The petitioner contended that it had always submitted returns regularly and never defaulted in paying sales tax. The assessing authority issued a notice for security, which the petitioner objected to, but the authority still demanded security. The Deputy Commissioner (Appeals) upheld the demand. The petitioner approached the High Court, arguing that the orders were illegal and arbitrary. The High Court examined section 6(7)(i) of the Act, which allows demanding security for tax payment or declaration form custody. The Court noted that the tax was paid, no past defaults existed, and the petitioner's financial position was stable. The assessing authority alleged misuse of declaration forms, but no specific instance was cited. The Court criticized the lack of valid reasons for demanding security, emphasizing that discretion must be exercised judiciously. The Court held that security cannot be demanded routinely without specific reasons. Consequently, the High Court allowed the writ petition, setting aside the orders demanding security. The Court clarified that authorities could demand security in the future if justified. The bank guarantee furnished earlier was made ineffective. No costs were awarded. The judgment highlighted the importance of proper reasoning and discretion in demanding security under the Act. In conclusion, the High Court's decision emphasized the need for valid reasons and judicious exercise of discretion in demanding security under the Rajasthan Sales Tax Act, 1954. The judgment upheld the petitioner's challenge, setting aside the arbitrary orders and emphasizing that security demands must be based on specific justifications, not routine practice.
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