(1) The Commissioner or any other person appointed to assist him under sub-section (1) of section 3, if it appears to him to be necessary so to do for the proper realisation of the tax levied under this Act, may, for reasons to be recorded in writing, impose as a condition of the issue of a certificate of registration to a dealer, or of the continuance in effect of such certificate issued to any dealer, a requirement that the dealer shall give security, in the manner as may be prescribed, for such amount as may be specified in the order.

Provided that the security shall not be less than ten thousand rupees but not exceeding the estimated tax liability for one year.

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

(3) Where the security furnished by a dealer under sub-section (1) is in the form of a surety bond and the surety becomes insolvent or is otherwise incapacitated or dies or withdraws, the dealer shall, within fifteen days of the occurrence of any of the aforesaid events, inform the Authority granting the certificate of registration and shall within thirty days of such occurrence furnish a fresh surety bond.

(4) The Authority granting the certificate of registration may, by an order in writing, for good and sufficient cause, forfeit the whole or any part of the security furnished by a dealer for realising any amount of tax, penalty or interest payable by a dealer:

Provided that no order shall be passed under this sub-section without giving the dealer and the surety a reasonable opportunity of being heard.

(5) The Authority granting a certificate of registration may, on application by the dealer, order the refund of security furnished by him or any part thereof, if the same is not required for the purposes of this Act.