The main legal point established is that a financier-in-possession of a transport vehicle is liable to pay tax from the date of possession under the relevant agreements, and the liability arises before the vehicle is used.

JUDGMENT :

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.

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 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.

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