(1) The registering authority may, for proper realisation of tax payable under this Act and for enforcement of lawful conduct of a dealer, who has applied for registration under this Act, demand from him a reasonable security, to be paid in the prescribed manner and if the security so demanded is not paid within such time as may be specified in the order demanding such security, he may, notwithstanding anything contained in this Act, refuse to grant him such registration:

Provided that no security under this Act shall be demanded from a dealer who has applied for registration, if such dealer is already registered under VAT Act and the rules .

(2) In case there is reasonable apprehension or likelihood of evasion of tax the registering authority may, at any time, for reasons to be recorded in writing, demand adequate security or additional security, as the case may be, in the prescribed manner.

(3) The security or additional security as referred to in subsections (1) and (2) shall not exceed the tax estimated to be paid by the dealer for one year.

(4) The registering authority may, after giving the dealer a reasonable opportunity of being heard, by order, adjust or forfeit, as the case may be, the whole or any portion of the security furnished by a dealer-

(a) for realizing any amount of tax, penalty or interest payable by the dealer ; or

(b) if the dealer has misused any form or has failed to keep them in proper custody.

(5) The registering authority may, on application by a dealer who has furnished security as required under sub-section (1), refund in the prescribed manner the entire amount of security or part thereof if such security is not required for the purposes for which it was furnished.