Security from Certain Classes of Dealers and Other Persons - Section 25 DVAT Act
Section 25 empowers the Commissioner to require security for specified tax compliance obligations, and explains when security may be adjusted, replaced, forfeited or replenished.
What does security mean under Section 25?
Security is an amount, asset or undertaking furnished to protect the revenue and ensure that a dealer or other person performs obligations under the Delhi Value Added Tax Act, 2004 or the Central Sales Tax Act, 1956. A surety bond is an undertaking by a surety to answer for obligations covered by the bond, subject to its terms and the applicable rules.
The provision refers to Rules 22 to 25 and Forms DVAT 12 to 15. It addresses security for registration, continuation of registration, realisation of tax and other dues, refunds under Section 38, and de-sealing or release under Section 60(4).
Section 25 - statutory provisions
The following reproduces the six sub-sections and conditions appearing in the source provision. Check later statutory amendments and notifications for the relevant assessment period.
Sub-section (1)
The Commissioner may, if it appears to him to be necessary so to do, for the continuance of the certificate of registration, or for the proper realisation of tax, composition money or other dues payable under this Act or as a condition of registering a person as a dealer or as a condition of making a refund under section 38 of this Act, or as a condition of de-sealing or release under sub-section (4) of section 60, require a person or prescribed class of persons to furnish security for the proper performance of their responsibilities under this Act or under the Central Sales Tax Act, 1956 (74 of 1956) in the prescribed amount, in the prescribed manner and within such time as may be prescribed.
Sub-section (2)
Notwithstanding sub-section (1) of this section, the Commissioner may increase, vary, reduce or waive the prescribed amount of the security, having regard to:
- the nature and size of the business activities of the person;
- the amount of any tax, interest or penalty for which the person may be or is likely to become liable at any time under this Act;
- the creditworthiness of the person;
- the nature of the security;
- any other matter which the Commissioner considers relevant;
Sub-section (3)
Where the security or additional security furnished by a person is in the form of a surety bond and the surety dies or becomes insolvent, the person shall within one month of the occurrence of such event, inform the Commissioner and shall within three months of such occurrence, execute a fresh surety bond.
Sub-section (4)
Where the surety bond has been executed by another registered dealer and the dealer's registration is either cancelled or he has closed down his business, the person shall furnish a fresh security as may be prescribed and in the manner as stated in sub-section (3) of this section.
Sub-section (5)
The Commissioner may, for good and sufficient cause, order the forfeiture of the whole or any part of the security furnished by a person.
Sub-section (6)
Where the security furnished by any person is forfeited in whole or is rendered insufficient, he shall furnish a fresh security of the requisite amount or, as the case may be, shall make up the deficiency in such manner and within such period as may be specified.
How Section 25 operates in practice
1. When security can be required
The Commissioner may require security for registration or its continuance, collection of tax, composition money or other dues, a refund, or release or de-sealing in circumstances specified by the Act. The amount, permitted form and time limit depend on the applicable rules and order.
2. Factors affecting the amount
Under sub-section (2), the Commissioner may increase, vary, reduce or waive the prescribed security after considering the business scale, potential tax exposure, creditworthiness, form of security and other relevant matters.
3. Changes affecting a surety
If a surety dies or becomes insolvent, the person must inform the Commissioner within one month and execute a fresh bond within three months. Where a registered-dealer surety loses registration or closes business, replacement security is required as provided in sub-section (4).
4. Forfeiture and shortfall
The Commissioner may forfeit all or part of security for good and sufficient cause. A person must then provide fresh security or make up any shortfall within the specified period and manner.
Rules, forms and official references
Rule 23 deals with the manner of furnishing security and refers to Form DVAT-12. The related Rules 22 to 25 and Forms DVAT 12 to 15 should be consulted for procedural details and the prescribed security requirements.
- Delhi VAT Act - official hosted consolidated reference (as on 5 March 2014)
- Delhi VAT Rules - official hosted reference (as on 5 March 2014)
- DVAT forms - Delhi Department of Trade and Taxes
- Notifications and subsequent updates
- Department of Trade and Taxes, Government of NCT of Delhi
The hosted 2014 consolidations are historical reference texts, not a guarantee of the law as amended through 2026. Check later amendments, orders and notifications before relying on a particular requirement.
Frequently asked questions
Can the Commissioner waive the security amount?
Yes. Sub-section (2) permits the Commissioner to increase, vary, reduce or waive the prescribed amount having regard to the stated considerations.
What if the surety becomes insolvent?
Sub-section (3) requires notice within one month and a fresh surety bond within three months of the occurrence.
Can a security deposit be forfeited?
Yes, under sub-section (5), for good and sufficient cause; sub-section (6) addresses replacement of forfeited or insufficient security.