Case Law Details
Dileep Kumar Upadhyay Vs State of Up And 3 Others (Allahabad High Court)
In Dileep Kumar Upadhyay vs. State of Uttar Pradesh & Others, the Allahabad High Court quashed a tax recovery citation issued against the petitioner for unpaid motor vehicle tax. The petitioner argued that after defaulting on a loan, his vehicle, a Tata Magic, was seized by Hinduja Leyland Finance Limited in 2013. Following the seizure, the vehicle was sold, and the petitioner no longer had possession of it. He contended that he had paid all taxes up until the vehicle was repossessed and that the liability for further taxes should fall on the financier, not him. The petitioner supported his argument by citing the Supreme Court’s ruling in Mahindra and Mahindra Financial Services Ltd. vs. State of U.P., which states that the financier becomes liable for tax once they take possession of the vehicle.
The State argued that the petitioner failed to notify the Taxation Officer about the seizure, as required by Rule 18 of the U.P. Motor Vehicles Taxation Rules, 1998. Despite this, the court found merit in the petitioner’s submission. The court held that under the Supreme Court’s judgment, the financier, after taking possession of the vehicle, bears the responsibility for paying the tax. Therefore, the liability for any tax post-seizure should not fall on the petitioner. The court directed that the petitioner’s objections be considered by the competent authority and quashed the tax recovery citation. However, any unpaid tax for the period before the vehicle’s seizure remained the petitioner’s responsibility.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Recovery citation dated July 16, 2024 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 he had purchased a Tata Magic (commercial vehicle), bearing registration No. UP 96 A 9871. The same was hypothecated with Hinduja Leyland Finance Limited. On account of default in repayment of loan, the vehicle was seized by the financier in the year 2013. It was thereafter sold. Upto the date the petitioner was in possession of the vehicle in question, he had deposited the tax. After possession of the vehicle was taken by the financier, the liability of the tax cannot be put on the petitioner as in that case the financier will be liable to pay the tax. The aforesaid facts have been stated by the petitioner in the objections filed to the recovery citation, however, not considered. 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 financier so as to enable the authority to fasten the liability on the financier.
As the petitioner had 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 possession of the vehicle in question was taken by the financier in April, 2022 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 14 of the aforesaid judgment is reproduced hereinbelow:
“14. 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 terms of Rule 18 of the Rules, the petitioner had already filed objection against the notice on March 14, 2022 mentioning that possession of the vehicle in question was taken by the financer in the year 2013. Subsequently, the vehicle was sold by the financer. The aforesaid objections are required to be considered by the competent authority and from the date of possession of the vehicle was taken by the financer, the liability may be re-worked out in terms of judgment of Hon’ble the Supreme Court in Mahindra and Mahindra Financial Services’ case (supra). However, for any period prior to that, if the tax has not been paid, the petitioner shall be liable to pay the same.
6. The writ petition is, accordingly, disposed of and recovery citation against the petitioner is quashed.
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