Ramaprasada Rao, J.
1. The petitioner is a spinning and weaving mills carrying on business at Rajapalayam. It is a registered dealer under the Tamil Nadu General Sales Tax Act, 1959, and the Central Sales Tax Act, 1956. During the assessment year 1966-67 the petitioner was not prompt in the payment of tax during the months commencing from April, 1966, to March, 1967. It is not in dispute that the tax which was payable monthly at the option of the petitioner was not paid as prescribed before the 25th of the succeeding month. The tax due for March, 1967, itself amounted to Rs. 1,569.28 according to the A-2 returns submitted by the petitioner. Having noticed such a default, the respondent, by virtue of his powers under Rule 24 of the Madras General Sales Tax Rules, 1959, read with Sub-section (5) of Section 21 proposed to demand a security for Rs. 25,000 towards future tax liability. The petitioner was called upon to furnish such security within 5 days from that date. The petitioner submitted its explanation in its letter dated 25th May, 1967, but expressed its difficulty in paying the tax as also to furnish the security deposit as according to the petitioner the textile industry was not opulent and successful commercially and it, therefore, sought the indulgence of the respondent to dispense with such security. But the respondent did not accept the explanation of the dealer and in the result, by his order dated 30th May, 1967, the respondent confirmed the demand for security deposit of Rs. 25,000 as proposed already. It is against this order, the present writ petition has been filed.
2. The first substantial contention of the learned counsel is that the demand for security itself is invalid ; it cannot be said to be an incident which is either incidental or ancillary to the sale or purchase of goods which is the essential sine qua non to attract the sales tax under the Act. His other contentions are that under the relevant section and the rules framed thereunder the statutory authority should before calling upon the defaulting assessee to furnish the security, estimate the taxable turnover and consequentially reckon the tax payable and ultimately demand only one half of the tax as security. In the instant case though there was material before the respondent that the tax liability was in the range of Rs. 1,500 per month the demand for Rs. 25,000 as and towards security under the relevant provisions of law are in its teeth and, therefore, not enforceable. The further contention is that no cash deposit can be sought from the assessee as is sought to be made under the challenged order and even on this ground the order has to be removed from the record. Learned counsel for the petitioner relied upon a typographical error which crept in the first notice dated 23rd May, 1967, under which the security demand was made but purporting to be in exercise of the power under Sub-rule (18) of Rule 24. On a perusal of the original records I find that Sub-rule (15) of Rule 24 is mentioned therein and therefore reliance upon the mistake which has crept in by accident, need not be considered though harped at length by the learned counsel for the petitioner.
3. The revenue's contention, on the other hand, is that even though the petitioner ventured to state its objection to the call for security deposit, it did not offer any security other than cash as alternative security and therefore it cannot have any grievance at this stage that the demand as such is vague and not provided for under the Act. As regards the contention that the taxing officer has not estimated the tax and ascertained the annual amount for which security might be demanded, the petitioner says that the record speaks for itself and there was no necessity for quantifying that in the manner stated by the learned counsel for the petitioner. As regards the legal contention reliance is placed upon Nand Lal Raj Kishan v. Commissioner of Sales Tax, Delhi : 1SCR283 .
4. I shall now take up the legal provision regarding the power of the appropriate authority to call or demand for security in cases where there is good and sufficient reason to do so. Section 21 of the Act deals with the procedure for registration. According to Section 21(1).
An application for registration shall be made to such authority, in such manner and within such period as may be prescribed and shall be accompanied by a fee of ten rupees.
5. Various other conditions are prescribed for the processing through the said application for registration and as per Section 21(4) a registered dealer shall be entitled to have his registration issued, if he is able to prove to the satisfaction of the prescribed authority that the necessary conditions as prescribed under the Act and the Rules made thereunder are satisfied. As we are concerned with only Sub-sections (5) and (6) of Section 21, they are extracted below:
21. (5) The prescribed authority shall have power for good and sufficient reasons-
(i) to cancel, modify or amend any registration certificate issued by him ; and
(ii) to demand from any dealer who has been registered or has applied for registration under this sub-section, security for proper payment of tax by him for an amount not exceeding one half of the tax payable on the turnover of the dealer for the year as estimated by the prescribed authority.
21. (6) No application for registration or for a copy or duplicate of the certificate and no renewal under this section shall be refused and no order under Sub-section (5) shall be made, unless the dealer concerned has been given an opportunity of being heard.
6. Though the prescribed authority shall have power for good and sufficient reason to demand from any dealer who has been registered or has applied for registration under this sub-section security for proper payment of tax by him for an amount not exceeding half the tax payable on the turnover of the dealer for the year as estimated by the prescribed authority, no order under Sub-section (5) shall be passed unless the dealer was given an opportunity to explain. That is the quintessence of this section. It is not left to the sweet will and the naked discretion of the prescribed authority to call for security under Section 21(5)(ii). He should do so only for good and sufficient reasons. It is, therefore, imperative on the part of the prescribed authority to weigh the pros and cons of each particular case and he should be subjectively satisfied on the objective material that there is good and sufficient cause for him to act under Sub-section (5) of Section 21 and demand security. There being no arbitrariness inherent in the context of Sub-section (5) of Section 21, I am unable to agree that this power is vague and is likely to be misused. But the argument however is that this power is alien to the object of the Act as the object of the Act is to impose the tax on sale or purchase at such prescribed points. The call or demand for security for proper payment of tax even for good and sufficient reasons, not being so intricately connected with the aspect of sale or purchase of goods, cannot be demanded and this provision is said to be beyond the competence of the State Legislature. It is established that if the Legislature vests in a body the power to impose, recover and collect tax on certain situations authorised under the Act, then it is but essential that certain safeguards should be made by that very Legislature to see that such tax is imposed and collected by the appropriate authorities in accordance with law and as prescribed therein. This is one of the ancillary objects which is so closely allied with the imposition and collection of sales tax. That this Act is intended to secure sales tax is not in dispute. Therefore if any provision is mainly intended as a prop to the furtherance and advancement of the main objective, namely, the imposition and collection of tax as authorised, then such a provision should be deemed in law to be both incidental and ancillary to the achievement of the objective of the Act. Though this question did not arise so pointedly, yet the observations of the Supreme Court in Nand Lal Raj Kishan v. Commissioner of Sales Tax, Delhi : 1SCR283 is apposite. There the power of the Commissioner under the Bengal Finance (Sales Tax) Act, 1941, to demand reasonable security while considering the application for registration as dealer under that Act came up for consideration before the court. The argument was that such a power gave an undefined, unlimited and unrestricted power to the Commissioner and that it fixed no time-limit with regard to the amount of security which might be demanded and there was no provision to that, effect. Repelling such contentions the Supreme Court stated that the power conferred on the Commissioner was not arbitrary and unlimited and unrestricted and that the power to levy a tax included the power to impose reasonable safeguards in collecting it, and demanding security for the proper payment of the tax payable under the Act was neither an arbitrary nor an unreasonable restriction, With utmost respect I conclude by adding that such demanding security for the proper payment of the tax payable under the Act is not only not arbitrary but is incidental to the exercise of such a power.
7. The next contention is that the prescribed tax authority has given notice to the petitioner to pay a sum of Rs. 25,000 as cash security deposit. Though it would be difficult to interpret the impugned order as is sought to be made out by the learned counsel for the petitioner, yet, even if a demand for cash security is made, it does not prevent the aggrieved person, namely, the assessee or the applicant for registration, to state his objections or his inconveniences for making such a cash deposit and offer an alternative security instead. The assessee did nothing of the kind in the instant case but expressed its difficulty to comply with the demand for security in cash and left it there. If the petitioner at least has offered to give alternative security and if that was refused by the department, then, possibly, the petitioner can be said to be an aggrieved person and would certainly be prejudiced thereby. No such occasion has arisen nor was it given by the petitioner for the revenue to act in the manner contended by it. I am, therefore, unable to agree with the contention that the order in the language couched by the prescribed authority is by itself indicative of an error apparent.
8. The last argument, however,;is well-founded. It is necessary for the prescribed authority under Section 21(5) to estimate the turnover of the dealer for the year in question, find out the tax due and demand security for the amount not exceeding half of the tax payable on such estimated turnover. Even cor ceding for argument's sake that Rs. 1,500 or thereabouts was the tax payable per month by the petitioner as disclosed in A-2 returns, the annual tax liability would come to about Rs. 18,000 or Rs. 19,000. Half of the said tax liability would be very near Rs. 9,000 or Rs. 10,000. Here, in the instant case, the demand for security for a sum of Rs. 25,000 was made by the respondent under the challenged order. This appears to be contrary to the prescription in Section 25(5)(ii) of the Act. There is, therefore, an error apparent in the face of the record and is thus the main limb of challenge to the order which is sought to be enforced by the authorities. I am constrained to find that there is an error apparent in the order impugned which ought to be removed by making the rule nisi absolute.
9. Hence this writ petition is allowed and there will be no order as to costs.
10. The revenue is at liberty to take appropriate steps under the prescribed circumstances to call for or demand the security in accordance with law from the petitioner herein if they so deem fit.