2022 (2) TMI 1006 - SC - VAT and Sales Tax

Liability to pay tax under the U.P. Motor Vehicles Taxation Act, 1997 - liability on the financier-in-possession of the transport vehicle or not - 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 - 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? - HELD 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. 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. 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 - 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. Appeal dismissed.

Summary

Issues Involved:
1. Liability of a financier-in-possession of a transport vehicle to pay tax under the U.P. Motor Vehicles Taxation Act, 1997.

Detailed Analysis:

1. Background and Context:
The appellant, a financier, took possession of a transport vehicle due to default in loan payment by the registered owner. The dispute centers on whether the financier-in-possession is liable to pay tax under the U.P. Motor Vehicles Taxation Act, 1997 (referred to as "Act, 1997").

2. Relevant Legal Provisions:
The case involves interpretation of Sections 2(h), 4, 9, 10, 12, and 20 of the Act, 1997, along with Sections 39, 50, and 51 of the Motor Vehicles Act, 1988 (referred to as "Act, 1988"). These sections define terms like "owner" and outline tax liabilities and conditions for non-use and refund of tax.

3. Appellant's Arguments:
The appellant argued that as a financier-in-possession, they should not be liable to pay tax unless the vehicle is used. They emphasized the importance of the vehicle's operation for tax liability and cited the case of State of Maharashtra vs. Sundaram Finance to support their position.

4. Respondent's Arguments:
The State argued that under Section 2(h) of the Act, 1997, the financier becomes the "owner" upon taking possession and is thus liable to pay tax. They highlighted the necessity of paying tax in advance as per Section 4(2-A) and the possibility of claiming a refund under Section 12 if the vehicle is not used.

5. Court's Analysis:
- Definition of "Owner": The court noted that under Section 2(h) of the Act, 1997 and Section 2(30) of the Act, 1988, a financier in possession of a vehicle under a hire-purchase or hypothecation agreement is considered the "owner."
- Charging Section: Section 4 of the Act, 1997 mandates that no transport vehicle can be used in a public place without paying the applicable tax in advance. The court emphasized that the tax must be paid before the vehicle is put to use.
- Refund Mechanism: Section 12 provides a mechanism for refund if the vehicle is not used after paying the tax. However, the refund is subject to fulfilling conditions such as surrendering the certificate of registration and other relevant documents.
- Liability to Pay Tax: The court concluded that the owner or operator must first pay the tax in advance. If the vehicle is not used, they may apply for a refund, but the initial liability to pay the tax remains.

6. Conclusion:
The court held that a financier who takes possession of a transport vehicle is liable to pay tax from the date of possession. If the vehicle is not used, the financier can seek a refund under Section 12, subject to compliance with the necessary conditions. The appeal was dismissed, upholding the High Court's decision that the financier-in-possession is liable to pay tax under the Act, 1997. There was no order as to costs.