Mahindra and Mahindra Financial Services Ltd vs State of U.P.

Mahindra and Mahindra Financial Services Ltd vs State of U.P.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1217 OF 2022
Mahindra and Mahindra
Financial Services Ltd. …Appellant(s)
Versus
State of U.P. and Ors. …Respondent(s)
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 16.12.2019 passed by the Full Bench of the High Court
of judicature at Allahabad, Bench Lucknow in Writ Petition No. 4529 of
2018 by which the High Court has dismissed the said writ petition
preferred by the appellant herein and held that the appellant herein as a
financier-in-possession of the transport vehicle is liable to pay tax under
the U.P. Motor Vehicles Taxation Act, 1997, the original writ petitioner,
the financier has preferred the present appeal. The said financier had
extended a loan for the purchase of the transport vehicle and on default
in payment of the loan is in possession of the vehicle in question.
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2. As above stated, that the appellant – Mahindra and Mahindra
Financial Services Limited, is a financier, who had extended a loan for
purchase of a transport vehicle. On default in payment of loan, it had
taken the possession of the vehicle in question. The dispute is liability to
pay tax under the U.P. Motor Vehicles Taxation Act, 1997 (hereinafter
referred to as the “Act, 1997”) on such financier-in-possession of the
vehicle. Before the High Court, the following question was referred to
the Full Bench:-
“1. Whether in view of Sections 2(g), 2(h), 4, 9, 10, 12,
13, 14 and 20 of the Act, 1997 read with Sections 39, 50
and 51 of the Act, 1988 and other relevant provisions of
the said enactments and the Rules of 1998 and 1989, a
Financier of a motor vehicle/ transport vehicle in respect
of which a hire-purchase, lease or hypothecation
agreement has been entered, is liable to tax from the date
of taking possession of the said vehicle under the said
agreements, even if, its name is not entered in the
Certificate of Registration or not? If not, who is liable in
this regard?
2.1 By the impugned judgment and order, the High Court has held
against the appellant – financier and has held that the appellant being in
possession of the vehicle as a financier is liable to pay tax under the Act,
1997.
2.2 Feeling aggrieved and dissatisfied with the impugned judgment
and order holding that the appellant as a financier-in-possession of the
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transport vehicle in question is liable to pay the tax under the Act, 1997,
the appellant – financier has preferred the present appeal.
3. Shri Prashant Kumar, learned counsel has appeared on behalf of
the appellant and Ms. Garima Prasad, learned Senior Advocate has
appeared on behalf of the State of U.P.
4. Learned counsel appearing on behalf of the appellant has taken us
through the relevant provisions of the Act, 1997 and also the provisions
of the Motor Vehicles Act, 1988 (hereinafter referred to as “Act, 1988”) in
support of his submission that being a financier-in-possession of the
transport vehicle, who has taken the possession of the transport vehicle
in question on default in payment of the loan, unless the said transport
vehicle is put to use and/or is being actually used, there shall not be any
liability on the appellant-financier to pay the tax payable under the Act,
1997.
4.1 Learned counsel appearing on behalf of the appellant has
vehemently submitted that the appellant is the financier, who had
extended a loan for purchase of the transport vehicle in question and on
default in payment of the loan, it took possession of the vehicle in
question. That the registered owner had paid all the taxes prior to the
date of such possession by the appellant-financier.
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4.2 It is submitted that the taxes due and payable under the Act, 1997
are on the ‘use’ of the transport vehicle. It is submitted therefore that
unless and until the transport vehicle possessed by the financier is put to
use, there shall not be any liability of the financier to pay the tax.
4.3 It is vehemently submitted by learned counsel appearing on behalf
of the appellant by relying upon Section 4(2-A), Section 6 and Section 9
that the Scheme of the Act emphasizes the operation of the vehicle
specifically a transport vehicle. It is submitted that on the operation/use
of a transport vehicle preliminary and additional tax is imposed on such a
public transport vehicle. It is contended that it is for this reason, both,
the operator and owner of the vehicle are included in the definition for
payment of tax in addition to registered owner. It is urged therefore that
the most important factor is operation/running of a vehicle as a precondition for imposition of tax. It is submitted that the aforesaid condition
becomes absolutely essential for the purpose of Section 12, which
provides that even in case the tax is paid in advance for running of
vehicle for a particular period and the same is not actually run for that
period then the refund may be sought and granted in appropriate case.
It is submitted that even for the purpose of refund also, as the financier,
who will not be in possession of a token or permit or the registration
certificate will not be in a position to even pray for refund.
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4.4 It is vehemently submitted by learned counsel appearing on behalf
of the appellant that as the original certificate of registration and the
permit would be with the registered owner, the appellant-financier cannot
use the transport vehicle in the absence of having any permit and/or
certificate of registration. Therefore, there cannot be any liability on the
financier to pay the tax imposed under the Act, 1997.
4.5 Making the above submissions and relying upon a decision of this
Court in the case of State of Maharashtra and Ors. Vs. Sundaram
Finance and Ors., (1999) 9 SCC 1, it is prayed to allow the present
appeal and to hold that the appellant being a financier-in-possession of
the transport vehicle is not liable to pay any tax under the Act, 1997
unless it is put to use.
5. Ms. Garima Prasad, learned Senior Advocate appearing on behalf
of the State has taken us through the entire Scheme of the Act, 1997.
She has submitted that under the provisions of the Act, 1997, every
“owner” and “operator” are liable to pay tax leviable under Section 4.
5.1 It is submitted that the financier, after taking possession of the
transport vehicle under the agreement – hire purchase or lease or
hypothecation, becomes the “owner” under Section 2(h) of the Act, 1997.
That once the financier-in-possession of the transport vehicle becomes
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the “owner”, he is liable to pay the tax leviable under Section 4 of the
Act, 1997. It is contended that as per Section 2(h) of the Act, 1997 and
Section 2(30) of the Motor Vehicles Act, the financier-in-possession can
be said to be the “owner”.
5.2 It is further submitted that in the case of ‘motor vehicles other than
a transport vehicle’, one-time tax is required to be paid at the time of
registration of the vehicle, without which the vehicle cannot be registered
nor can it be used. It is submitted that a case of arrears of tax, additional
tax and penalty would not arise in such a case. That in the case of a
“transport vehicle”, since there is no provision of one-time tax,
operators/owners are required to pay the tax at uniform intervals of time
as per law. It is submitted that as per Section 9(3) read with Section
20(3) both the “owner” and “operator” would be jointly and severally
liable. It is urged that as far as arrears which are due prior to the
financer taking the possession, the primarily liability to pay is on the
owner or operator, and if it is not possible to recover from such a person
for any reason whatsoever, the same is recoverable from financier, as
according to Section 20(2), arrears are first charged over the motor
vehicle. It is submitted therefore that in order to satisfy the first charge,
the person in possession is liable to satisfy the same. But since the
primarily liability is on the registered owner, the financier, after depositing
the arrears of tax, shall be entitled to recovery of the same as per law.
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5.3 It is submitted by Ms. Garima Prasad, learned Senior Advocate
appearing on behalf of the respondent – State of U.P. that Section 4 of
the Act, 1997 is the charging section. That as per Section 4 (2-A) save
as otherwise provided by or under the Act no public service vehicle other
than those referred in sub-section (1-A) and sub-section (2) shall be
USED in any public place in Uttar Pradesh unless a monthly tax at such
rate as may be notified by the State Government is paid in respect
thereof. As per the proviso, instead of monthly tax, a quarterly or a
yearly tax may be payable at such rate as may be notified by the State
Government. It is submitted that as per Section 9(1)(iv)(a) the tax
payable under sub-section (2-A) of Section 4 shall be payable in
advance for one calendar month at the time of registration of the vehicle
under the Act, 1988 and thereafter on or before the fifteenth day of each
calendar month next following. It is submitted that such a tax is required
to be paid in advance and hence the liability to pay the tax is first and
then only can the vehicle be used. Therefore, the financier-inpossession of the transport vehicle being an “owner”, as defined under
the Act, 1997, is liable to first pay the tax. That in case, after the
payment of tax, the vehicle is not used, then, after following the
procedure and subject to compliance of Section 12, such a
financier/owner can claim refund of the tax paid. That the question of
refund on non-use will arise only in a case where the tax is first paid. It
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is submitted therefore that the liability to pay the tax would arise first and
only thereafter the refund can be claimed under Section 12 of the Act,
1997.
5.4 So far as the submission on behalf of the appellant-financier that,
as the appellant-financier is not the registered owner and/or the
registration is not transferred in favour of the appellant-financier and the
original permit and certificate of registration of the vehicle, which would
be in the name of the registered owner will be with the registered owner
and therefore the appellant-financier even cannot claim the refund is
concerned, it is contended that it is for the financier, while taking the
possession, to ensure that all the documents are seized. Even the
financier can also pray for another certificate of registration as per the
provisions of the Act, 1988. It is submitted that on the aforesaid ground,
the liability of the financier-in-possession as an “owner” to pay the tax in
advance as per Section 4(2-A) read with Section 9(1)(iv)(a) would not
cease.
5.5 Learned Senior Advocate appearing on behalf of the State has
heavily relied upon the decision of this Court in the case of Jagir Singh
and Ors. Vs. State of Bihar and Ors., (1976) 2 SCC 942 : 1976 (2)
SCR 80 and the decision of the Gujarat High Court dated 25.01.2017 in
Abdul Samad Abdul Hamid Shaikh Vs. State of Gujarat, Special
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Civil Application No.5788 of 2012 in support of her submission that the
financier-in-possession of the vehicle can be said to be the “owner” and
is liable to pay the tax in advance and the only remedy available to such
a financier is to claim refund in case of vehicle is not used, otherwise he
is liable to pay the tax dues.
5.6 Making the above submissions and relying upon above decisions,
it is prayed to dismiss the present appeal.
6. Heard the learned counsel for the respective parties at length.
7. The issue before this Court is, whether, a financier of a motor
vehicle/transport vehicle in respect of which a hire-purchase, lease or
hypothecation agreement has been entered, is liable to tax from the date
of taking possession of the said vehicle under the said agreements.
8. While deciding the present issue, the relevant provisions of the
U.P. Motor Vehicles Taxation Act, 1997 are required to be referred to and
considered. They are Sections 2(h), 4, 9, 10, 12 and 20, which read as
under:-
“2(h) "owner" in respect of a motor vehicle means the
person whose name is entered in the certificate of
registration issued in respect of such vehicle, and where
such vehicle is the subject of an agreement of hire
purchase or lease or hypothecation, the person in
possession of the vehicle under that agreement and
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where any such person is a minor, the guardian of such
minor;
4. Imposition of tax.- (1) Save as otherwise provided in
this Act or the rules made thereunder, no motor vehicle
other than a transport vehicle, shall be used in any public
place in Uttar Pradesh unless a one-time tax at the rate
applicable in respect of such motor vehicle, as may be
specified by the State Government by Notification in the
Gazette has been paid in respect thereof:
Provided that in respect of an old motor vehicle
instead of a one time tax, annual tax applicable to such
motor vehicle as may be specified by the State
Government by Notification in the Gazette may be paid.
(1-A) Save as otherwise provided in this Act or the
rules made thereunder no three wheeler motor cab and
goods carnage having gross vehicle weight not exceeding
3000 kilograms, shall be used in any public place in Uttar
Pradesh unless yearly tax at such rate of such motor
vehicle, as may be specified by the State Government by
notification in the Gazette, has been paid in respect
thereof:
Provided that in respect of a motor vehicle under
this sub-section in lieu of yearly tax such amount of one
time tax may be payable as specified by the State
Government by notification in the Gazette.
Provided also that from the date of commencement
of the Uttar Pradesh Motor Vehicles Taxation
(Amendment) Act, 2014 no motor vehicle other than a
transport vehicle shall be used in any public place after
the expiry of validity of registration under the Motor
Vehicles Act, 1988 unless a green tax at the rate
applicable to such Motor Vehicles as may be specified by
notification, by the State Government has been paid in
respect thereof.
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(2) Save as otherwise provided by or under this Act
no goods carriage other than those specified in subsection (1-A), construction equipment vehicles, specially
designed vehicles, motor cab (other than three wheeler
motor cab), maxi cab and public service vehicles owned
or controlled by the State Transport Undertaking, shall be
used in any public place in Uttar Pradesh unless a
quarterly tax at the rate applicable to such motor vehicle
as may be specified by the State Government by
notification in the Gazette, has been paid in respect
thereof:
Provided that in respect of a motor vehicle under
this sub-section instead of quarterly tax, an yearly tax at
such rate as may be specified by the State Government
may be payable.
(2-A) Save as otherwise provided by or under this
Act no public service vehicle other than those referred 1n
subsection (1-A) and sub-section (2) shall be used in any
public place in Uttar Pradesh unless a monthly tax at such
rate as may be notified by the State Government is paid
in respect thereof:
Provided that in respect a motor vehicle under this
sub-section instead of monthly tax, a quarterly or an
yearly tax at such rate as may be notified by the State
Government may be payable.
(2-B) Where any reciprocal agreement relating to
taxation of goods carried by road is entered into between
the Government of Uttar Pradesh and any other State
Government or a Union Territory, the levy of tax under
sub-section (1-A) or sub-section (2) shall, notwithstanding
anything contained in the said sub-section, be in
accordance with the terms and conditions of such
agreement:
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Provided that the tax so levied shall not exceed the
tax which would otherwise been levied under the Act.
(3) Where any motor vehicle other than a transport
vehicle is found plying as a transport vehicle, such tax
therefore as may be notified by the State Government,
shall be payable.
(4) The State Government may, by notification,
increase by not more than fifty percent, the rates of tax,
specified in Part 'B', Part 'C' or Part 'D' of the First
Schedule.
9. Payment of tax and penalty—(1) Subject to the
provisions of Section 11—
(i) the tax payable under sub-section (1) of section 4
shall be paid at the time of the registration of the vehicle
under the Motor Vehicles Act, 1988:
Provided that in respect of an old motor vehicle, the
tax shall be payable in advance on or before the fifteenth
day of January in each year;
(ii) the tax payable under sub-section (1-A) of
Section 4, shall be payable in advance for one year at the
time of the registration of the vehicle under the Motor
Vehicles Act, 1988 and thereafter on or before be fifteenth
day of the first calendar month of the each year next
following.
(iii) the tax payable under sub-section (2) of Section
4 shall be payable in advance for one quarter at the time
of registration of the vehicle under the Motor Vehicles Act,
1988 and thereafter on or before the fifteenth day of the
first calendar month of the each quarter next following."
(iv) (a) the tax payable under sub-section (2-A) of
Section 4 shall be payable in advance for one calendar
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month at the time of registration of the vehicle under the
Motor Vehicles Act, 1988 and thereafter on or before the
fifteenth day of each calendar month next following.
(b) the special tax payable under Section 4A in
respect of vehicles covered by temporary permit issued
for the conveyance of passengers on special occasions,
such as to and from fairs and religious gatherings or to
carry marriage parties, tourist parties or such other
reserved parties shall be paid at the time of issuance of
such temporary permit.
(2) When any person transfers a motor vehicle
registered in his name to any other person, then without
prejudice to the liability of the transfer or in this regard,
the transferee shall be liable to pay the arrears of tax,
additional tax and penalty, if any, in respect of the motor
vehicle so transferred, due on or before the date of its
transfer, as if the transferee was the owner of the said
motor vehicle during the period for which such tax,
additional tax or penalty is due.
(3) Where the tax or additional tax in respect of a
motor vehicle is not paid within the period specified in
sub-section (1), in addition to the tax or the additional tax
due, a penalty at such rate not exceeding the due amount
as may be prescribed, shall be payable, for which the
owner and the operator if any shall be jointly and
severally liable.
(4) In computing the amount of tax, additional tax or
penalty under this Act the amount shall be rounded off to
the nearest rupee, that is to say a fraction of a rupee
being fifty paise or more shall be rounded off to the next
higher rupee and any fraction less than fifty paise shall be
ignored.
10. Vehicles not to be used in Uttar Pradesh
without payment of tax— (1) Notwithstanding anything
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contained in Section 9, no transport Vehicle shall ply in
Uttar Pradesh—
(a) under a temporary permit granted under the
Motor vehicles Act, 1988 by an authority having
jurisdiction outside Uttar Pradesh unless there has been
paid in respect thereof a tax under Section 4 for its use or
stay in Uttar Pradesh.
(b) under a national permit granted under subsection (12) of Section 88 of the said Act by an authority
having jurisdiction outside Uttar Pradesh unless there has
been paid in respect thereof a tax under Section 4
calculated at the rate specified by the State Government
by Notification in the Gazette in the manner prescribed.
(c) under a permit granted under sub-section (9) of
Section 88 of the said Act read with the Motor Vehicles
(An India Permit for Tourist Transport Operators) Rules,
1993 by an authority having jurisdiction outside Uttar
Pradesh unless there has been paid in respect thereof a
tax under Section 4 at the rate specified by the State
government by notification in the Gazette in the manner
prescribed:
Provided that the State Government may, by
notification, increase by not more than fifty per cent, the
rates of tax or additional tax, as the case may be,
specified in the said Schedules.
(2) For the purpose of levy and payment of tax
under sub-clause (i) of clause (a) of sub-section (1), the
tax payable for any two weeks or part thereof shall be
2/13th of the rate specified in the First Schedule.
(3) In such transport vehicle is found plying in Uttar
Pradesh without payment of the tax or additional tax
payable under this Act such tax or additional tax along
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with a penalty, equivalent to five times of the due tax shall
be payable.
Provided that the tax under this section shall not be
payable in respect of Motor Cabs plying exclusively within
the notified area of Noida, Greater Noida and Ghaziabad
Development Authority from Delhi on the basis of permit
issued by the Transport Authorities of National Capital
Territory Delhi.
Provided further that the tax under this section shall
not be payable in respect of motor cabs (CNG operated)
plying exclusively with the limits of National Capital
Region under the permit granted as per agreement
entered into with the Governments of Uttar Pradesh,
Haryana, Rajasthan and the National Capital Territory of
Delhi.
12. Non-use of vehicle and refund of tax—(1)
When any person who has paid the tax in respect of a
transport vehicle, proves to the satisfaction of the
Taxation Officer in the prescribed manner that the motor
vehicle in respect whereof such tax has been paid, has
not been used for a continuous period of one month or
more since the tax was last paid, he shall be entitled to a
refund of an amount equal to one-third of the rate of
quarterly tax or one twelfth of the yearly tax, as the case
may be, payable in respect of such vehicle for each thirty
days of such period for which such tax has been paid:
Provided that no such refund shall be admissible
unless such person has surrendered the certificate of
registration, the token, if any, issued in respect of the
vehicle and the permit, if any, to the Taxation Officer,
before the period for which such refund is claimed.
Provided further that where one time tax has been
paid for a motor vehicle under sub-section (I-A) of Section
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4, the amount equivalent to 1/120 for each month shall be
refunded in respect of such vehicle.
(2) Where the operator or, as the case may be, the
owner of a motor vehicle, does not intend to use his
vehicle for a period of one month or more he shall, before
the date the tax or additional tax, as the case may be, is
due, surrender the certificate of registration, the token, if
any, issued in respect of the motor vehicle and the permit,
if any, to the Taxation Officer of the region where the tax
or additional tax was last paid and on such surrender, no
tax or additional tax under this Act shall be payable in
respect of such vehicle for each complete calendar month
of the period during which the vehicle remains withdrawn
from use and the aforesaid documents remain
surrendered with the Taxation Officer:
Provided that in case such vehicle is found plying
during the period when its documents as mentioned in
this sub-section remain surrendered with the Taxation
Officer, such owner or operator, as the case may be, shall
be liable to the tax and the additional tax as if the
documents were not surrendered and shall also be liable
to the penalty equivalent to five times of the tax and
additional tax.
(3) Where the owner of a motor vehicle in respect
whereof one-time tax has been paid under this Act proves
to the satisfaction of the Taxation Officer in prescribed
manner that such motor vehicle has not been used for a
continuous period of one month or more, he shall be
entitled to a refund of such tax as may be specified by the
State Government by notification in the Gazette for the
said period:
Provided that no such refund shall be admissible,
unless the certificate of registration and the token, if any,
issued in respect of the vehicle are surrendered by the
owner with the Taxation Officer:
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Provided further that the total amount of refund
under this sub-section shall not exceed the one-time tax
paid under this Act.
(4) In calculating the amount of refund under subsection (3) any portion of the period being less than a
month, shall be ignored.
(5) The owner of a motor vehicle other than a
transport vehicle, in respect whereof one-time tax has
been paid under this Act shall be entitled to refund of such
tax at the rates specified by the State Government by
notification in the Gazette on the ground that he has, after
payment of such tax, paid tax in respect of such vehicle
under any enactment relating to any tax on motor vehicles
in any other State or Union Territory as a consequence of
such vehicle having been brought over permanently to
such other State or Union Territory or that such motor
vehicle has been converted into a transport vehicle or that
the registration of such motor vehicle has been cancelled.
(6) Where any person who has paid the tax other
than one-time tax in respect of an old motor vehicle,
proves to the satisfaction of the Taxation Officer that the
motor vehicle, in respect of which such tax has been paid,
has not been used for a continuous period of one month
or more since the tax or installment was last paid, he shall
be entitled to-a refund of an amount equal to one-twelfth,
of the rate of annual tax payable in respect of such
vehicle for each complete calendar month of such period
for which such tax has been paid:
Provided that no such refund shall be admissible
unless such person has surrendered the certificate of
registration and the token, if any, issued in respect of the
vehicle to the Taxation Officer, before the period for which
such refund is claimed.
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(7) An operator of a transport vehicle entitled to any
refund of tax under sub-section (1), shall also be entitled
to refund of such portion of the additional tax paid under
Section 6, as is attributable to the period for which he is
entitled to refund under sub-section (1); and the amount
of. such refund shall be calculated on the same principle
as is laid down in the said sub-section.
(8) Where the operator, or as the case may be, the
owner of a motor vehicle is unable to use his motor
vehicle due to an accident of the said vehicle and the
certificate of registration, the token, if any, issued in
respect of the said vehicle and the permit, if any are
surrendered to the Taxation Officer within a week from the
date of such accident together with a copy of the first
information report, such surrender shall be deemed to
have been made on the date of the accident.
20. Recovery of tax—(1) Arrears of any tax or
additional tax or penalty payable under this Act shall be
recoverable as arrears of land revenue.
(2) The tax, the additional tax and penalty payable
under this Act shall be first charge on the motor vehicle
including its accessories, in respect whereof it is due.
(3) The Taxation Officer shall raise a demand in the
form as may be prescribed, from the owner or operator,
as the case may be, for the arrears of tax and additional
tax and penalty of each year, which shall also include the
arrears of tax, additional tax or penalty, if any, of
preceding years.”
8.1 Section 2(30) the Motor Vehicles Act defines “owner”, which reads
as under:-
(30) “owner” means a person in whose name a motor
vehicle stands registered, and where such person is a
minor, the guardian of such minor, and in relation to a
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motor vehicle which is the subject of a hire-purchase,
agreement, or an agreement of lease or an agreement of
hypothecation, the person in possession of the vehicle
under that agreement;”
8.2 Section 51 of the Motor Vehicles Act provides for special
provisions regarding motor vehicle subject to hire-purchase agreement,
etc. Section 51(1) to Section 51(5) reads as under:-
“51. Special provisions regarding motor vehicle
subject to hire-purchase agreement, etc.—(1) Where
an application for registration of a motor vehicle which is
held under a hire-purchase, lease or hypothecation
agreement (hereafter in this section referred to as the
said agreement) is made, the registering authority shall
make an entry in the certificate of registration regarding
the existence of the said agreement.
(2) Where the ownership of any motor vehicle
registered under this Chapter is transferred and the
transferee enters into the said agreement with any
person, the last registering authority shall, on receipt of an
application in such form as the Central Government may
prescribe from the parties to the said agreement, make an
entry as to the existence of the said agreement in the
certificate of registration 2 and an intimation in this behalf
shall be sent to the original registering authority if the last
registering authority is not the original registering
authority.
(3) Any entry made under sub-section (1) or subsection (2), may be cancelled by the last registering
authority on proof of the termination of the said
agreement by the parties concerned on an application
being made in such form as the Central Government may
prescribe and an intimation in this behalf shall be sent to
the original registering authority if the last registering
authority is not the original registering authority.
(4) No entry regarding the transfer of ownership of
any motor vehicle which is held under the said agreement
shall be made in the certificate of registration except with
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the written consent of the person whose name has been
specified in the certificate of registration as the person
with whom the registered owner has entered into the said
agreement.
(5) Where the person whose name has been
specified in the certificate of registration as the person
with whom the registered owner has entered into the said
agreement, satisfies the registering authority that he has
taken possession of the vehicle from the registered owner
owing to the default of the registered owner under the
provisions of the said agreement and that the registered
owner refuses to deliver the certificate of registration or
has absconded, such authority may, after giving the
registered owner an opportunity to make such
representation as he may wish to make (by sending to
him a notice by registered post acknowledgement due at
his address entered in the certificate of registration) and
notwithstanding that the certificate of registration is not
produced before it, cancel the certificate and issue a fresh
certificate of registration in the name of the person with
whom the registered owner has entered into the said
agreement:
Provided that a fresh certificate of registration shall
not be issued in respect of a motor vehicle, unless such
person pays the prescribed fee:
Provided further that a fresh certificate of
registration issued in respect of a motor vehicle, other
than a transport vehicle, shall be valid only for the
remaining period for which the certificate cancelled under
this sub-section would have been in force.”
8.3 As per Section 2(h) of the Act,1997 read with Section 2(30) of the
Act, 1988, even a person in possession of the vehicle under the hirepurchase agreement or an agreement of sell or an agreement of
hypothecation can also be said to be the “owner”. Therefore, a financier
like the appellant, who is in possession of the transport vehicle in
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question owing to non-payment of the loan amount is an “owner” under
the relevant provisions of the Act, 1997 and Act, 1988.
8.4 Section 4 of the Act, 1997 is the charging section. As per
Section 4, no motor vehicle other than a transport vehicle, shall be used
in any public place in Uttar Pradesh unless a one-time tax at the rate
applicable in respect of such motor vehicle has been paid in respect
thereof. Section 4 (2-A) provides that no public service vehicle
(transport vehicle) other than those referred in sub-section (1-A) and
sub-section (2) SHALL BE USED in any public place in Uttar Pradesh
unless a monthly tax at such rate as may be notified by the State
Government is paid in respect thereof. It further provides that in respect
of a motor vehicle under Section 4(2-A) instead of monthly tax, a
quarterly or a yearly tax at such rate as may be notified by the State
Government may be payable. Section 9 provides for payment of tax and
penalty. As per Section 9(1)(iv)(a) the tax payable under sub-section (2-
A) of Section 4 shall be payable in advance for one calendar month at
the time of registration of the vehicle under the Motor Vehicles Act, 1988
and thereafter on or before the fifteenth day of each calendar month next
following. Section 12 provides for non-use of vehicle and refund of tax.
As per Section12(1) when any person who has PAID THE TAX in
respect of a transport vehicle, proves to the satisfaction of the Taxation
Officer in the prescribed manner that the motor vehicle in respect
21
whereof SUCH TAX HAS BEEN PAID, has not been USED for a
continuous period of one / month or more since the tax was last paid, he
shall be entitled to a refund of an amount equal to one-third of the rate of
quarterly tax or one twelfth of the yearly tax, as the case may be payable
in respect of such vehicle for each thirty days of such period for which
such tax has been paid. However, Section 12(2) provides that where the
operator or, as the case may be, the owner of a motor vehicle, does not
intend to use his vehicle for a period of one month or more he shall,
before the date the tax or additional tax, as the case may be is due,
surrender the certificate of registration, the token, if any, issued in
respect of the motor vehicle and the permit, if any, to the Taxation Officer
of the region where the tax or additional tax was last paid and on such
surrender, no tax or additional tax under Act, 1997 shall be payable in
respect of such vehicle for each complete calendar month of the period
during which the vehicle remains withdrawn from use and the aforesaid
documents remain surrendered with the Taxation Officer. As per proviso
to sub-section (2) of Section 12 in case such vehicle is found plying
during the period when its documents as mentioned in sub-section (2) of
Section 12 remain surrendered with the Taxation Officer, such owner or
operator, as the case may be, shall be liable to tax and additional tax as
if the documents were not surrendered and shall also be liable to penalty
equivalent to five times of the tax and additional tax.
22
9. On a conjoint reading of the aforesaid provisions, it can be seen
that in respect of a transport vehicle, the tax is to be paid in advance as
monthly tax or yearly tax, as the case may be, and only thereafter such
vehicle shall be put to use.
Therefore, before any transport vehicle is put to use or used, the
owner is liable to pay the tax in advance and only thereafter the vehicle
can be used or operated. The wordings of Section 4(2-A) are very clear
that no public service vehicle SHALL BE USED in any public place
unless a monthly tax at such rate as may be notified by the State
Government is paid in respect thereof. As per Section 9(1)(iv)(a), the tax
payable under sub-section (2-A) of Section 4 shall be payable in
advance on or before fifteenth day of each month next following.
Therefore, the requirement under law is to first pay the tax in advance as
provided under Section 9 and thereafter to use the vehicle. In other
words, it is ‘pay the tax and use’ and not ‘use and pay the tax’.
Therefore, the submission on behalf of the appellant-financier that tax
has to be paid at the time of use or thereafter cannot be accepted. If
such a submission is accepted, in that case, Section 9(1)(iv)(a), which
provides for the amount of tax to be paid in advance will become
redundant and/or nugatory.
9.1 However, in a case where, after the tax is paid as per Section 4(2-
A) read with Section 9, the vehicle is not used and there is non-use of
23
the vehicle, the operator and/or the owner, as the case may be, may
apply and claim for refund as per Section 12 and may get the refund
subject to fulfilling all the requirements as provided under Section 12.
The question of refund will come only when the tax is first paid and
thereafter on non-use, the tax paid is to be refunded, of-course subject
to fulfilling the requirements of claiming the refund as provided under
Section 12 of the Act, 1997.
10. The sum and substance of the aforesaid discussion would be that
the owner or operator has to first pay the tax in advance and thereafter if
the transport vehicle is not used for a continuous period of one month or
more since the tax was last paid, he may have to apply for the refund,
which may be granted subject to compliance of the necessary
requirements as per first proviso to Section 12 and subject to satisfaction
of the Taxation Officer that the transport vehicle has not been used for a
continuous period of one month or more since the tax was last paid.
10.1 There is only one eventuality where no tax or advance tax under
the Act, 1997 shall be payable namely under sub-section (2) of Section
12, where the operator or, as the case may be, the owner of a motor
vehicle, does not intend to use his vehicle for a period of one month or
more, he shall, before the date the tax or additional tax, as the case may
be, is due, surrender the certificate of registration, the token, if any,
issued in respect of the motor vehicle and the permit, if any, to the
24
Taxation Officer of the region where the tax or additional tax was last
paid and only on such surrender, no tax or additional tax under Act, 1997
shall be payable in respect of such vehicle for each completed calendar
month of the period during which the vehicle remains withdrawn from
use and the aforesaid documents remain surrendered with the Taxation
Officer.
11. The submission on behalf of the petitioner is that many a time, the
documents referred to in sub-section (2) of Section 12 are not with the
financier/owner and they remain with the registered owner and therefore
such a financier/owner may not be able to get the refund under subsection (1) of Section 12 or exemption from payment of tax as per subsection (2) of Section 12 is concerned, on the aforesaid ground, the
liability of the owner/financier to pay the tax will not cease. It is for the
financier to acquire the documents such as original registration
certificate, permit, token etc. from the registered owner at the time of
seizure of the vehicle. If, for any reason, the financier/owner is not able
to secure the documents, then he has to follow the procedure for getting
fresh certificate of registration as provided under Section 51 of the Act,
1988. Therefore, before seeking refund under sub-section (1) of Section
12 or before he is exempted from payment of tax under sub-section (2)
of Section 12, such an operator / owner has to comply with and fulfill all
the conditions, which are mentioned therein.
25
11.1 An identical question came to be considered by the Gujarat High
Court in the case of Abdul Samad Abdul Hamid Shaikh (supra),
where in paragraphs 5.3 and 5.4, it is observed and held as under:-
“5.3 ………………………..If the vehicle is repossessed
by the financier subsequently, in that case the remedy
available to such financier would be by submitting an
appropriate application before the appropriate authority of
non-use of such vehicle and for the period of such nonuse the liability to pay the tax shall not arise. Otherwise,
the liability to pay the tax continues.
5.4 Section 4(1) of the Act, 1958 provides that the tax is
required to be paid in advance by every registered owner,
or any person having possession or control, of such motor
vehicles. Section 8 of the Act, 1958 provides that if the tax
leviable in respect of any motor vehicle remains unpaid by
any person liable for the payment thereof, and such
person before having paid the tax has transferred the
ownership of such vehicle or has ceased to be in
possession or control of such vehicle, the person to whom
the ownership of the vehicle has been transferred or the
person who has possession or control of such vehicle
shall also be liable to pay the said tax to the Taxation
Authority………………….”
12. In view of the above discussion and for the reasons stated above,
it is held that a financier of a motor vehicle/transport vehicle in respect of
which a hire-purchase or lease or hypothecation agreement has been
entered, is liable to tax from the date of taking possession of the said
vehicle under the said agreement. If, after the payment of tax, the
vehicle is not used for a month or more, then such an owner may apply
for refund under Section 12 of the Act, 1997 and has to comply with all
the requirements for seeking the refund as mentioned in Section 12, and
26
on fulfilling and/or complying with all the conditions mentioned in Section
12(1), he may get the refund to the extent provided in sub-section (1) of
Section 12, as even under Section 12(1), the owner / operator shall not
be entitled to the full refund but shall be entitled to the refund of an
amount equal to one-third of the rate of quarterly tax or one twelfth of the
yearly tax, as the case may be, payable in respect of such vehicle for
each thirty days of such period for which such tax has been paid.
However, only in a case, which falls under sub-section (2) of Section 12
and subject to surrender of the necessary documents as mentioned in
sub-section (2) of Section 12, the liability to pay the tax shall not arise,
otherwise the liability to pay the tax by such owner/operator shall
continue.
Under the circumstances, the impugned judgment and order
passed by the Full Bench of the High Court does not warrant any
interference by this Court. The appeal stands dismissed accordingly.
However, in the facts and circumstances of the case, there shall be no
order as to costs.
………………………………….J.
 [M.R. SHAH]
NEW DELHI; ………………………………….J.
FEBRUARY 22, 2022. [B.V. NAGARATHNA]
27

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