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For registration under the Punjab VAT Act 2005 one of the requirement u/s 25(1) is furnishing of security for securing the payment of tax under PVAT Act 2005. This requirement is compulsory as per the wording of section 25(1) of PVAT Act 2005 which runs as under: Every person applying for registration under this Act, shall furnish a security of rupees fifty thousand in the manner, prescribed for securing proper and timely payments of tax or any other sum, payable by him under this Act: Provided that the security already furnished by a person registered under the repealed Act, shall be deemed to have been furnished under this Act. As the word “shall” has been mentioned in section 25(1), furnishing of security of Rs 50000 is compulsory at the time of applying for registration under PVAT Act 2005. Such security may be in the form of a Bank Gurruntee or in the form of surety bonds acceptable to the designated officer.

Who is designated officer u/s 25: The designated officer u/s 25 is the Excise and Taxation officer as per notification No. S.O. 14/P.O.5/2005/S.3./2005 dated 31-03-2005. The competent authority to ask for additional security u/s 25 is the Excise and taxation officer.

When Additional security can be demanded.: Section 25(3) of PVAT Act 2005 provides that if it appears expident to the designated officer for realization of tax, he may demand the additional security upto Rs 2 Lacs at any time while the registration certificate is in force, from the person to whom the registration has been granted. Section 25(3) runs as under:

Where it appears expedient to the designated officer, granting registration, so to do, for the proper realisation of, tax payable under this Act, he may, at any time while such certificate is in force, by an order in writing and for reasons to be recorded therein, require the person, to whom the registration has been granted, to furnish within such time, as may be specified in the order and in the prescribed manner, such additional security, not exceeding rupees two lac in addition to the security, furnished under sub–section (1), as may be specified in the order, for the aforesaid purpose:

Provided that no person shall be required to furnish any additional security under this sub-section, unless he has been given an opportunity of being heard. From above it is clear that additional security is to be demanded only when there is an expediency for the realisation of tax payable under the PVAT Act. But before demanding the additional security reasons must be recorded in writing by the designated officer for demanding the additional security. That is to say he should record reasons which led him to believe that there exist an expediency for realization of tax payable in regard to a person by whom the tax is payable. I have seen some cases where additional security is demanded by the department officials at the time of application of registration that too on irrelavent grounds. Under section 25(3) it is clearly mentioned as also highlighted above that additional security may be demanded at any time while such certificate is in force and from that person to whom the registration has been granted. The additional security cannot be asked for at the time of application of registration. Even after the registration additional secutrity should be asked for after giving an opportunity of being heard to the person concerned. For example if some person is defaulting in payment of tax or in filing the returns this may be a suitable ground to ask for the additional security from the defaulting dealer.

My experience: Recently I had faced a situation where additional security was sought at the time of application of registration that too on the ground that the proprietor of the firm applying for registration was a female. Firstly at the time of applying for registration no additional security should be asked for in view of section 25(3) as explained above. The rationale behind it which I find out of my legal conscience, is that, there is no tax due to the revenue from the dealer’s side when applying for registration, still a security of Rs 50000 is given by the dealer u/s 25(1) for securing the payment of tax that may arise in near future after the registration is granted. Secondly even after registration I feel additional security should be demanded only in cases when there is expediency for the realization of tax payable i.e when there is fear that the tax payable may not be recovered in the normal routine and circumstances. The facts such as the dealer is a female should not be a basis for demanding additional security u/s 25(3).

Please Note: The views expressed are my personal views based upon my studies and interpretation of law.


(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email:, M +919815243335)

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June 2024