Section 28. Security from certain class of dealers

(1) Where it appears necessary to the authority to which an application is made under section 21 or 22 for issue of certificate of registration, so to do for the proper realization of the tax, penalty and interest payable under this Act, it may by an order in writing and for the reasons to be recorded therein, impose as a condition for the issue of certificate of registration a requirement that the dealer shall furnish in the prescribed manner and within such time as may be specified in the order, such security as may be specified in the order for the aforesaid purpose.

(2) Where it appears necessary to the authority referred to in section 21, or the Commissioner so to do for the proper realization of the tax, interest and penalty payable or which has become due for payment, for any period of any year, he may, at any time, by an order in writing and for reason to be recorded therein, require a registered dealer to furnish in the prescribed manner and within such time as may be specified in the order, such security or if such dealer has already furnished any security, such additional security as may be specified in the order.

(3) No dealer shall be required to furnish any security under subsection (1) or any security or additional security under sub-section (2) unless he has been given an opportunity of being heard.

(4) The amount of security, which a dealer may be required to furnish under sub-section (1) or sub-section (2), or the aggregate of the amount of such security, and the amount of additional security which he may be required to furnish under sub-section (2) by the authority referred to therein or the Commissioner, shall not exceed the amount of tax, interest and penalty payable or which has become due for payment for a period of any year according to the estimate of the authority referred to in sub-section (1) or the Commissioner, on the turnover of sales or turnover of purchase of goods of such dealer for any period of any year.

(5) Where the security furnished by a dealer under sub-section (1) or sub-section (2) is in the form of a surety bond and the surety becomes insolvent or dies, the dealer shall, within thirty days of the occurrence of any of the aforesaid events, inform the authority referred to in sub-section (1) or sub-section (2) or, as the case may be, the Commissioner and shall within ninety days of such occurrence, furnish a fresh security for the same amount as that of the bond in the form of a bond or in any other prescribed manner

(6) The authority referred to in sub-section (1) or sub-section (2) or, as the case may be, the Commissioner may, by order and for good and sufficient cause, forfeit the whole or any part of the security furnished by a dealer for realizing any amount of the tax, interest or penalty payable by the dealer: Provided that no order shall be passed under this sub-section without giving the dealer an opportunity of being heard.

(7) Where by reason of an order under sub-section (6), the security furnished by any dealer is rendered insufficient, he shall make up the deficiency in such manner and within such time as may be prescribed.

(8) The authority referred to in sub-section (1) or sub-section (2) or, as the case may be, the Commissioner may, on an application made by a dealer in that behalf, make an order of refund of any amount or part thereof deposited by the dealer by way of security or for the release of bond under this section, if it is not required for the purpose of realization of tax, interest or penalty.

(9) Where a dealer fails to furnish security as required under subsection (1), (2), (5) or (7), the authority referred to in section 21 shall refuse to issue or, as the case may be, shall cancel the certificate of registration:

Provided that the refusal or cancellation of a certificate of registration under this sub-section shall, notwithstanding anything contained in subsection (3) of section 3, not affect the liability of the dealer to pay the tax, penalty and interest due for any period before or after the date of such refusal or cancellation of the certificate of registration; and accordingly the provisions of this Act shall continue to apply.