(1) If for any reason and subject to the provisions of rule 25, the security or part thereof, paid under sub-rule (1) of rule 24, is required to be refunded to the dealer, the said dealer shall make an application to the registering authority in Form VAT -105.

(2) The registering authority, on receipt of such application, shall conduct or cause to be conducted such enquiries as he deems necessary, and if he is satisfied that the dealer is not in default of any dues under the Act and these rules, he may order release of the security held under pledge and return the document to the dealer on receipt of proper acknowledgement.

(3) Where the registering authority is satisfied after conducting or causing to be conducted enquiries as referred to in sub-rule (2) that the dealer is in default of any amount of tax, interest or penalty or composition money or any other amount under the Act and these rules, he may adjust the security paid for the satisfaction of such outstanding arrear dues and release the balance, if any, to the dealer, after receipt of proper acknowledgment.