The Supreme Court Tuesday said that a financier of a transport vehicle, for which a lease or hypothecation agreement has been entered, is liable to tax under the Uttar Pradesh Motor Vehicles Taxation Act 1997 from the date of taking possession of the vehicle. The apex court refused to interfere with the December 2019 judgement of the Allahabad High Court which had held that the financier-in-possession of the transport vehicle was liable to pay tax under the 1997 Act.
A bench of Justices M R Shah and B V Nagarathna dismissed the appeal filed by the financier, who had extended loan for purchase of the vehicle in question, against the high court verdict.
"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," the bench said in its judgement.
The top court said that if, after the payment of tax, the vehicle is not used for a month or more, then the owner may apply for refund under section 12 of the 1997 Act and has to comply with all the requirements for seeking the refund as mentioned in the provision.
"However, only in a case, which falls under sub-section (2) of section 12 and subject to the 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," it said.
The bench noted in its verdict that the financier had extended a loan for the purchase of the transport vehicle and on default in payment of loan, is in possession of the vehicle in question.
It also noted that counsel appearing for the appellant had referred to relevant provisions of the 1997 Act and the Motor Vehicles Act, 1988 in support of his submission that being a financier-in-possession of the vehicle, unless the vehicle is put to use or is being actually used, there shall not be any liability on the financier to pay tax under the 1997 law.
The counsel appearing for the state had submitted before the apex court that under the provisions of the 1997 Act, every "owner" and "operator" is liable to pay tax leviable under Section 4.
The bench, while referring to the relevant provisions of the 1997 Act, noted that a financier who is in possession of the transport vehicle in question owing to non-payment of loan is an "owner" under the relevant provisions of the 1997 law and also the 1988 Act.
It said that Section 4 of the 1997 Act is the "charging section" as per which 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 has been paid in respect thereof.
It said 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 bench noted.
"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," it said.
The bench said in a case where, after the tax is paid and the vehicle is not used, the operator or the owner may apply and claim for refund as per section 12 and may get refund subject to fulfilling all the requirements.
"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," it said.
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