The liability for payment of motor vehicle tax can be fastened on the financer of a vehicle from the date of taking possession of the vehicle under the hire-purchase or hypothecation agreement, as established by the judgment of the Supreme Court.

ORDER :

1. Recovery citation dated November 7, 2022 issued against the petitioner, on account of motor vehicle tax, is under challenge in the present petition.

2. The argument raised by the learned counsel for the petitioner is that the petitioner had purchased a Tata Ace Magic vehicle bearing registration No.UP 62T 8337 on January 24, 2013. The petitioner borrowed loan from TATA Motors Finance Limited (respondent no.5). The vehicle was hypothecated with TATA Motors Finance Limited. The petitioner regularly paid installments of the loan. Thereafter, due to loss in travelling business, he failed to pay further installments. On August 25, 2014, the petitioner surrendered the vehicle before respondent no.5. Thereafter, the vehicle was sold by the Finance Company to some other person. After possession of the vehicle was taken by the financer, the liability of the tax cannot be put on the petitioner as in that case the financer or the subsequent purchaser will be liable to pay the tax. In support of the argument reliance has been placed upon judgment of Hon'ble the Supreme Court in Mahindra and Mahindra Financial Services Ltd. vs. State of U.P. and others, (2022) 5 SCC 525.

3. Learned counsel for the State submitted that in terms of Rule 18 of the U.P. Motor Vehicles Taxation Rules, 1998 (hereinafter referred to as 'the Rules'), the petitioner was required to inform the Taxation Officer about the fact that the possession of the vehicle in question was taken by the financer, so as to enable the authority to fasten liability on the financer. As the petitioner has failed to do so, demand was raised against him. However, in case, he points out the details to the Taxation Officer, the issue will be examined in the light of judgment of Hon'ble the Supreme Court in Mahindra and Mahindra Financial Services' case (supra).

4. After hearing the learned counsel for the parties, we find merit in the submission made by learned counsel for the petitioner as he stated that vehicle in question was surrendered to the financer in August 2014 and in view of the judgment of Hon'ble the Supreme Court in Mahindra and Mahindra Financial Services' case (supra), the liability for payment of tax thereafter cannot be fastened on the petitioner. Relevant paragraph 12 of the aforesaid judgment is reproduced hereinbelow:

"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 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."

(emphasis supplied)

5. In view of aforesaid, the petitioner may file objection against the recovery citation dated November 7, 2022 in terms of Rule 18 of the Rules, mentioning that possession of the vehicle in question was taken by the financer in August 2014. In case, the petitioner files objection, the same