(1) The registering authority, for good and sufficient reasons to be recorded, may require a dealer in writing who has applied for registration under the Act to pay, within fourteen days from the date of receipt of the notice of demand, a reasonable security which, in his opinion, will be equivalent to tax estimated by him as being payable by the dealer for one year. The demand of security shall be made in Form E 19.

(2) The registering authority may, where there is reasonable apprehension or likelihood of evasion of tax, require a registered dealer to pay, within fourteen days from the date of receipt of notice of demand in Form E 19, a reasonable security or additional security, as the case may be, which, in his opinion, will be equivalent to tax estimated by him as being payable by the dealer for one year.

(3) The security referred to in sub-rules (1) and (2) shall be furnished by the dealer in any of the following manners:-

(a) by depositing as security in the Government Treasury the amount fixed by the said authority; or

(b) by depositing security amount in the Post Office Savings bank and pledging the Pass Book and depositing it with the said authority; or

(c) by pledging and depositing with the authority, National Savings Certificate for the amount of security fixed; or

(d) by mortgaging immovable property free from all encumbrances, in favour of such authority for the amount of security demanded.

(4) (a) If for any reason the security or part thereof, paid under sub-rule (1) or (2), is required to be refunded to the dealer, the said dealer shall make an application to the registering authority in Form E 20.

(b) The registering authority shall, on receipt of such application and after conducting or causing to be conducted such enquiries as he may deem necessary and after being satisfied that the dealer is not in default of any dues under the Act and these rules, release the security and return the document to the dealer on proper acknowledgement.

(c) Where the registering authority is satisfied, after conducting or causing to be conducted such enquiries as he may deem necessary, that the dealer is in default of any amount of tax, interest or penalty or any other amount under the Act and these rules, he may adjust the security paid for realisation of such outstanding arrear dues and release the balance, if any, to the dealer in the same manner as specified in clause (b).