(1) Where the assessing authority is of the opinion that a dealer who has applied for registration or has been registered or has applied for renewal of registration should furnish security or additional security for the proper payment of the tax payable by him, the said authority, may direct him in writing to furnish, within such time as may be fixed by the said authority security for an amount, not exceeding one half of the tax payable on the turnover of the dealer for the years as estimated by it or three months, compounded amount in the case of dealers who have opted to pay tax under Section 7. In making such estimate the said authority shall take into account the taxable turnover of the dealer, if any, during the preceding years, the trend of business at the time the estimate is made, the nature of the goods dealt in by him and such other factors as may, in the opinion of the said authority, assist it in making a proper estimate.

(2) Such security may be furnished by the dealer in any of the following ways, namely:

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

(b) by depositing with the said authority Government securities for the amount fixed by the said authority; or

(c) by depositing security amount in the Post Office Savings Bank and pledging the Pass book to and depositing it with, the said authority; or

(d) by furnishing to the said authority a guarantee from a Bank, approved in this behalf by the said authority, agreeing to pay to the State Government, on demand, the amount of security fixed by the said authority; or

(e) by furnishing two sureties acceptable to the said authority by executing a security bond for such amount in Form 6.

(f) by a bond prescribed under rule 42 for the amount fixed by the said authority in Form No. 39 duly registered along with title, possession and valuation certificates obtained from the Tahsildar concerned and the value of property shall not be lower than the amount, shown in the bond.

Explanation- In the case of security furnished in Form No. 6, surety must be solvent enough for the amount assured.

(3) The security furnished shall be maintained in full so long as the registration certificate continues to be in force and may in the event of default of payment of any tax be liable to adjustments towards such tax after due intimation.