C.M. Lodha, C.J.
1. By this writ petition under Article 226 of the Constitution, the petitioner has called into question the appellate order of the Deputy Commissioner (Appeals), Commercial Taxes, Jaipur, dated 15th June, 1979 (annexure 6), by which the learned Deputy Commissioner (Appeals) upheld the order of the Commercial Taxes Officer, Special Circle II, Jaipur, dated 27th November, 1978, directing the petitioner to furnish security in the amount of Rs. 25 lacs under Section 6(7)(i) of the Rajasthan Sales Tax Act, 1954 (hereinafter referred to as the 'Act').
2. The petitioner is a registered dealer under the Rajasthan Sales Tax Act, 1954, and has its industrial complex at Kota, known as Sriram Chemical Industry and Sriram Rayons. It has also vanaspati depots and departmental stores of textiles at Jaipur and various other places in Rajasthan.
3. The petitioner's case is that it has always been submitting the returns regularly and has never committed defaults in paying the sales tax in time. It has averred that there has not been a single occasion when the petitioner has committed default in submitting the return or in the matter of payment of tax. It has also been alleged that the petitioner is maintaining regular books of account as well as correct and complete account of declaration forms issued to it under the Act. It has been further asserted that the declaration forms issued to it are kept in proper custody and have never been misused. However, the assessing authority, namely, the Commercial Taxes Officer, Special Circle II, Jaipur, issued a notice dated 12th September, 1977 (annexure 1), to the petitioner calling upon it to submit security for Rs. 30 lacs or to show cause why such security should not be taken. The petitioner submitted his objections on 5th October, 1977(annexure 2), to the said notice but the assessing authority by its order dated 27th November, 1978 (annexure 3), called upon the petitioner to furnish security in the amount of Rs. 25 lacs under Section 6, Sub-clause (7)(i), of the Act. Aggrieved by the order of the assessing authority, the petitioner filed appeal before the Deputy Commissioner (Appeals), Commercial Taxes, Jaipur, who dismissed the same by his order dated 20th June, 1979 (annexure 6). The petir tioner, has, therefore, approached this Court for issue of an appropriate writ, direction or order against the sales tax authorities.
4. The learned counsel for the petitioner has urged that the impugned orders passed by the assessing authority and the appellate authority are illegal, unjust and void being arbitrary and in utter disregard of the relevant provisions contained in Section 6(7)(i) of the Act.
5. In order to appreciate the contention raised on behalf of the petitioner, we may reproduce here Section 6(7)(i) of the Act for ready reference:
Section 6. (7)(i) Where it appears to the assessing authority necessary so to do for ensuring proper payment of tax payable under this Act or for proper custody and use of declaration forms issued under the provisions of this Act or the Rules, he may, by order in writing and for reasons to be recorded, demand from any dealer who had been registered or has applied for registration under this section or under Section 6A or Section 6B or Section 9, a security to be furnished in the prescribed manner and within the time specified in the order. The amount of security demanded shall not exceed Rs. 5,000 or the amount of tax payable in accordance with the estimate of such authority on the turnove'r of the dealer for one quarter of the year in which the security is demanded, whichever is higher.
6. Now, it is clear from a bare perusal of the section reproduced above that the security can be demanded either when it appears to the assessing authority necessary so to do for ensuring proper payment of tax payable under the Act or for proper custody and use of declaration forms issued under the provisions of the Act and the Rules. The other requirement of the section is that reasons must be recorded in support of the order. In the present case, the tax found due from the petitioner has been paid. It is also clear from the impugned orders that the assessee has never committed default in payment of tax found due against it in the past. The assertion made by the petitioner that it had even paid the advance tax in time has not been controverted by the department. There is not a single instance mentioned in the impugned orders when the assessee may have made misuse of declaration forms issued to it under the Act. It is not the case of the department that the assessee is not in a good financial position so that it may not be in a position to pay up the demands when created in future. It is also not the case of the assessing authority that the assessee carries on such a hazardous business or deals in any such commodity as may suddenly result in losses so that it may be necessary to safeguard the interests of the revenue for future. However, the Commercial Taxes Officer has observed as follows:
It is also common knowledge that the assessee obtains declarations in a huge quantity and there are cases of misuse of declarations in C forms by the assessee.
7. It is not at all clear to us whether the assessee had ever made any misuse of the declaration forms in the past and we fail to understand what the Commercial Taxes Officer means by saying that 'it is common knowledge'. Does he refer to the general malpractice prevailing among the assessees or is he referring to the petitioner? In our opinion, he seems to be referring to the assessees in general as he has used the words 'common knowledge'. Be that as it may, the learned counsel for the department could not cite a single instance before us when the assessee may have misused the declaration in form C.
8. The order of the Commercial Taxes Officer has been upheld by the Deputy Commissioner (Appeals) on the simple ground that the demand of security is a matter of discretion. However, we may point out that in each case discretion has to be exercised on sound principles. It should be exercised judiciously and not arbitrarily. After having gone through the impugned orders passed by the Commercial Taxes Officer as also the Deputy Commissioner (Appeals), we are satisfied that no valid reasons have been recorded for demanding security from the petitioner under Section 6(7)(i) of the Act. It is not the intention behind Section 6(7)(i) of the Act that security may be demanded in all cases irrespective of any considerations. The opening part of the section says that it should appear to the assessing authority necessary to do so for ensuring proper payment of tax payable under the Act or to safeguard against misuse of declaration forms that security has to be demanded and reasons for the same have to be recorded. We are of the opinion that security cannot be demanded as a matter of routine without specifying the reasons for doing so.
9. The result is that we allow this writ petition and set aside the impugned orders passed by the Commercial Taxes Officer, Special Circle II, Jaipur, dated 27th November, 1978, and by the Deputy Commissioner (Appeals), Commercial Taxes, Jaipur, dated 15th June, 1979. However, this order will not stand in the way of the authorities concerned for demanding security from the petitioner in future in accordance with law if a proper case is made out. The bank guarantee furnished by the petitioner in pursuance of the stay order granted by this Court on 5th July, 1979, is made ineffective. In the circumstances, we make no order as to costs.