(1) The registering authority may, for proper realization of tax payable under this Act and for enforcement of lawful conduct of any dealer from time to time, demand from a registered dealer, a reasonable security, or additional security, as the case may be, 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, cancel the certificate of registration granted to him:

Provided that no such cancellation shall be made unless the dealer has been given a reasonable opportunity of being heard.

(2) In case there is reasonable apprehension or likelihood of evasion of tax as a result of misutilisation of way bills, the registering authority may, for reasons to be recorded in writing, demand adequate security or additional security, as the case may be, in the prescribed manner from the dealer before issue of way bills to him on application made in that behalf.

(3) The registering authority may, by order, adjust or forfeit, as the case may be, the whole or any portion of the security furnished by a dealer -

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

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

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

(4) Where, by reason of any order under sub-section (3), the security furnished by a dealer is forfeited in whole or is rendered insufficient, such dealer shall, on demand made by order of the registering authority, furnish fresh or further security of the requisite amount or shall make up the deficiency, as the case may be, in such manner and within such period as may be specified in such order.

(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 any amount of security or part thereof if such security is not required for the purposes for which it was furnished.