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2019 (12) TMI 1579 - HC - Indian LawsLevy of tax - Financier of a motor vehicle/transport vehicle in respect of which a hire-purchase lease or hypothecation agreement has been entered - liability of 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? - HELD THAT - As regards motor vehicles other than a transport vehicle liability regarding arrears in respect thereof would be practically Nil as one time tax is paid. If a dispute regarding liability to pay arrears of tax etc. in respect of motor vehicles other than transport vehicles does arise it will have to be determined keeping in mind the enunciation of the law as aforesaid. The Financier on taking possession of the vehicle will be liable accordingly - It is not out of place at this stage to mention that when the registered owner (borrower) is in arrears of tax etc. then intimation of such arrears and the liability of the registered owner to pay such arrears of tax is sent not only to the registered owner but is also sent to the Financier under Rule 18(3) read with Form E-I of the Act 1997 as quoted earlier on his address meaning thereby the Financier can avoid such further liability by taking suitable action either for possession of the vehicle treating it to be a breach of agreement if there is any such condition in the agreement or they can avoid such liability by ensuring such conditions being incorporated in the agreements with the borrower. The fact that the name of the Financier after taking possession of such vehicle is not entered in the Certificate of Registration as the registered owner is of no consequence in this regard as the provisions contained in Sub-section (3) of Section 9 Sub-section (3) of Section 20 and Section 2(g) and 2(h) do not contemplate any such requirement in the case of a vehicle covered under the relevant agreements already discussed hereinabove which is in possession of the Financier under such agreement. All that is necessary is the possession of the motor vehicle. If it has been taken by the Financier under such agreement he would be liable of course alongwith the operator if any jointly and severally. Neither the provisions of Section 50 and 51 nor the corresponding Rules contained in Rule 61 regarding entry of name in the Certificate of Registration or issuance of fresh certificate to Financier have any relevance whatsoever so far as liability in such a scenario to pay tax additional tax or penalty under Sub-Section 3 of Section 9 read with Section 20 of the Act 1997 is concerned. If the action under Section 51(3) and/or (3) read with Rule 61(2) is held to be a necessary prerequisite for liability to tax etc. then it would render part of definition of Operator and Owner regarding possession meaningless and superfluous in this context as such eventuality would in any case be covered by the first part of Section 2(h) and second part of Section 2(g). The words Owner and Operator occurring in Section 9 and 20 have to be read in consonance with the definition clause contained in Section 2(g) and (h) as already discussed - the word used in Section 9(3) and 20 of the Act 1997 is not registered owner but Owner therefore for purposes of liability to tax etc. the Act 1997 in view of Section 2(h) therein envisages the onus not only on the registered owner but also on the person in possession under the agreements referred earlier. The same analogy/principle applies to the liability of Operator under Section 2(g). In the context of the questions referred to us the fact that the name of the Financier is not entered in the Certificate of Registration is irrelevant. What is relevant is whether he has taken possession of the vehicle under the agreements referred earlier or not. The word used in Section 9(3) and 20 of the Act 1997 is not registered owner but Owner therefore for purposes of liability to tax etc. the Act 1997 in view of Section 2(h) therein envisages the onus not only on the registered owner but also on the person in possession under the agreements referred earlier. The same analogy/principle applies to the liability of Operator under Section 2(g). In the context of the questions referred to us the fact that the name of the Financier is not entered in the Certificate of Registration is irrelevant. What is relevant is whether he has taken possession of the vehicle under the agreements referred earlier or not. Application disposed off.
Issues Involved:
1. Liability of the Financier to pay tax upon taking possession of a vehicle. 2. Correctness of previous judgments regarding the liability of the Financier. Detailed Analysis: Issue 1: Liability of the Financier to Pay Tax Upon Taking Possession of a Vehicle Relevant Provisions and Definitions: - Sections 2(g) and 2(h) of the Act, 1997: Define 'Operator' and 'Owner'. - Sections 4, 9, 10, 12, 13, 14, and 20 of the Act, 1997: Deal with the imposition, payment, and recovery of tax. - Sections 39, 50, and 51 of the Act, 1988: Relate to the registration and transfer of motor vehicles. - Rules of 1998 and 1989: Provide procedural guidelines. Court's Interpretation: - Ownership and Liability: The Financier, upon taking possession of the vehicle under a hire-purchase, lease, or hypothecation agreement, becomes the 'Owner' under Section 2(h) and is liable for tax from the date of possession, irrespective of registration status. - Joint and Several Liability: Under Section 9(3), both the 'Owner' and 'Operator' are jointly and severally liable for tax, additional tax, and penalties. This applies especially to transport vehicles where both roles may exist. - Declaration and Payment: As per Section 13 and Rule 7, the person in possession of the vehicle must submit a declaration and pay the tax due. The Financier must comply with this upon taking possession. - First Charge: Section 20(2) establishes that tax and penalties have the first charge on the vehicle, making the Financier liable for arrears if the registered owner defaults. Conclusion on Issue 1: The Financier is liable for tax from the date of taking possession of the vehicle, including current and arrear taxes, even if not registered as the owner. Issue 2: Correctness of Previous Judgments Judgments Considered: - Lakhimpur Finvest Company Ltd.: Did not fully consider Sections 9(2), 20(2), 51, and the concept of joint and several liability under Section 9(3). - Manish Mukhriya: Similar shortcomings as Lakhimpur Finvest. - Amar Nath Chaubey: Incorrectly introduced the concept of de jure and de facto possession and misapplied Section 9(2). It also failed to consider Section 9(3) and the practical implications of possession under hire-purchase agreements. Court's Conclusion: - Lakhimpur Finvest and Manish Mukhriya: Do not lay down the law correctly as they conflict with the interpretation provided in the current judgment. - Amar Nath Chaubey: Incorrectly interpreted the definitions and requirements under the relevant sections and rules. The judgment is not good law to the extent it conflicts with the current interpretation. - Other Cases: Judgments in Kamil Hussain and Shriram Transport Finance Company Ltd. also do not correctly lay down the law. Conclusion on Issue 2: The judgments in Lakhimpur Finvest, Manish Mukhriya, Amar Nath Chaubey, Kamil Hussain, and Shriram Transport Finance Company Ltd. do not correctly interpret the law regarding the liability of the Financier for tax upon taking possession of a vehicle. Final Directions: The Registry is directed to place the record of the writ petition along with this judgment before the appropriate Bench for further proceedings.
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