'Cautious' can be used to make the sentence meaningful which means alert or be careful. The context of the statement is that of the monsoon season being a bit troublesome due to slippery roads which need to be navigated with care. 'Prepared' and 'smart' may appear to be true but we need to choose the most suitable response which in this case is 'cautious'. Hence, 'cautious' is the correct answer.
Sales Tax is different from the Excise duty as former is a tax on the act of sale while the latter is a tax on the act of manufacture or production of goods.
Reference: http://www.cbec.gov.in/faq.htm
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