Amar Nath Chaubey vs State Of U.P. & 4 Others
2017 Latest Caselaw 2903 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Court No. - 3                                                                                 
 

 
Case :- WRIT TAX No. - 521 of 2017
 

 
Petitioner :- Amar Nath Chaubey
 
Respondent :- State Of U.P. & 4 Others
 
Counsel for Petitioner :- Harindra Prasad
 
Counsel for Respondent :- C.S.C.
 

 
Hon'ble Pankaj Mithal, J.

Hon'ble Umesh Chandra Tripathi, J.

Heard Sri Harindra Prasad, learned counsel for the petitioner and Sri Himanshu Shekhar, learned Standing Counsel appearing for all the respondents.

The petitioner had purchased a taxi bearing registration no.UP 67 T 3558 on 29.4.2012. The said vehicle was purchased by the petitioner on being financed by the Tata Motor Finance. The petitioner got the said vehicle registered in his name. There is no averment in the pleadings that the said vehicle was purchased under a hire purchase agreement or under an agreement of lease or hypothecation, though it was duly financed and appears to be under hypothecation. On account of non-payment of instalments it was re-possessed on 17.10.2014 by the finance company.

A recovery of Rs.39,600/- as tax and Rs.32,076/- as penalty, total Rs.71,676/- for the period 1.10.2012 to 30.6.2016 has been issued in the name of the petitioner. The petitioner, aggrieved by the said recovery, has preferred this petition contending that as the vehicle was in possession of the finance company during the said period, the liability to pay taxes in respect of the said vehicle is upon it.

The pleadings in the petition clearly reveal that the petitioner is the registered owner of the aforesaid vehicle and that its possession was allegedly taken over by the finance company on 17.10.2014. Therefore, at least till the aforesaid date, the petitioner is liable to pay taxes in respect of the said vehicle. The recovery is in respect of the period 1.10.2012 to 30.6.2016 and, as such, whole of it cannot be held to be bad as against the petitioner.

Now the question arises as to the person liable to pay tax/ additional tax in respect of the said vehicle w.e.f. 17.10.2014, the date on which it was allegedly re-possessed by the Finance Company.

The contention of learned counsel for the petitioner is that as the petitioner had ceased to be in possession of the vehicle the liability to pay tax thereof would lie upon the finance company.

The issue as to who is in actual possession of the vehicle or that it had been re-possessed by the finance company are matters of fact dependent upon evidence of the parties which is beyond adjudication in exercise of extra-ordinary jurisdiction.

The matters with regard to motor vehicles and payment of taxes thereon are governed by the provisions of Motor Vehicles Act, 1988 and the U.P. Motor Vehicles Taxation Act, 1997 and the Rules framed thereunder.

Section 4/4-A of the Uttar Pradesh Motor Vehicles Taxation Act, 1997 is the charging section which imposes liability of tax /additional tax in respect of a motor vehicle upon the owner of the vehicle.

The owner of the vehicle is defined under Section 2(h) of the aforesaid Act to mean a person whose name is entered in the certificate of registration of the vehicle and in case such vehicle is subject to an agreement of hire purchase or lease or hypothecation the person in possession of the vehicle.

Similar is the definition of the "owner" under Section 2(30) of the Motor Vehicles Act, 1988.

For the sake of ready reference, the definition of the 'owner' as appearing in Section 2(30) of the Motor Vehicles Act, 1988 and as per Section 2(h) of the U.P. Motor Vehicles Taxation Act, 1997 are reproduced herein below :-

"2. Definitions - In this Act, unless the context otherwise requires,-

..................

30. "owner" means a person in whose name a motor vehicle stands registered, any where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase, agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement;"

And

"2. Definitions.- In this Act,-

.....................

(h) "Owner" in respect of a motor vehicle means the person whose name is entered in the certificate of registration issued in respect of such vehicle, and where such vehicle is the subject of an agreement of hire-purchase or lease or hypothecation, the person in possession of the vehicle under that agreement and where any such person is a minor, the guardian of such minor;"

Both the above definitions are identical and para materia.

Sections 50 and 51 of the Motor Vehicle Act, 1988 provide for transfer of ownership of the vehicle.

Section 51 of the aforesaid Act specifically deals with transfer of motor vehicles which are subject to hire-purchase agreement. It mandates the registering authority to make an entry in the certificate of registration regarding existence of hire-purchase agreement. It further provides that the aforesaid entry may be cancelled by the registering authority on proof of termination of the said agreement by the parties concerned for which an application in the prescribed form is necessary and that no entry regarding transfer of ownership of the vehicle under an agreement shall be made in the certificate of registration except with the written consent of the person in whose name the certificate of registration exists. It also empowers the registering officer to score out the name of the registered owner and to enter the name of the person who has taken possession of the vehicle from the registered owner owing to default of the agreement.

In view of provisions of Section 51 of Motor Vehicles Act, 1988, it is clear that the change of ownership of a vehicle which is held under a hire-purchase agreement can only be effected either after the termination of the agreement or if the possession of the vehicle is taken over by the financier subject to satisfying that the possession is so taken and that the registered owner has refused to deliver the original certificate of registration or is otherwise absconding.

Section 9(2) of the U.P. Motor Vehicles Taxation Act, 1997 provides that if a person transfers a motor vehicle registered in his name to any other person the transferee shall be liable to pay arrears of tax /additional tax and penalty in respect of the motor vehicle so transferred. It shifts the liability to pay the taxes upon the transferee provided the transfer is established in accordance with law.

In view of the above provisions of law, the primary liability to pay tax in respect of motor vehicle is upon its owner which means a registered owner or the transferee and in case the vehicle is under hire-purchase agreement or hypothecation, the person in possession of the vehicle which refers to a person whose name is entered in the certificate of registration in accordance with Section 51 of the Motor Vehicles Act.

Admittedly, in the case in hand, the petitioner is the registered owner of the vehicle and he continues to be in his name despite it being repossessed by the finance company as alleged. The expression "the person in possession of the vehicle" used in the definition of owner refers to de jure possession of the vehicle in contrast to the de facto possession or the person recorded to be in possession in accordance with Section 51 of Motor Vehicles Act. The finance company may acquire physical possession of the vehicle under a hire-purchase agreement or hypothecation for one reason or the other but so long as the parties do not determine or terminate the agreement or apply for change of the ownership in certificate of registration of the vehicle and gets the name of the person in possession of it duly recorded the de jure possession of the vehicle remains with the registered owner. This is implicit on the plain reading of the definition of the "owner" and the provisions of the Section 51 of the Motor Vehicles Act, 1988.

In the case we are dealing, undisputedly finance agreement or hire-purchase agreement, if any, between the parties has not been determined. At least, there is no evidence on record to establish that it has come to an end or that on the said vehicle being repossessed by the finance company any application for transfer of registered ownership was made or that an endorsement of possession has been made therein in favour of the Finance Company.

A reading of Section 9(2) of the U.P. Motor Vehicles Taxation Act, 1997 also makes it clear that the liability to pay tax in respect of vehicle shifts to the transferee only if the vehicle is transferred, obviously referring to the mode of transfer as contemplated under Section 51 of the Motor Vehicles Act, 1988.

It is in this view of the matter a Division Bench of this Court of which one of us (Justice Pankaj Mithal) was a member vide judgment and order dated 27.04.2017 in Writ Tax No.201 of 2017 Kamil Hussain Vs. State of U.P. and 4 others held that when hire-purchase agreement was not determined and the name of the financier was not entered as its registered owner and the vehicle continued in the name of the registered owner with no endorsement of change of possession, there is no transfer of vehicle and mere physical possession would not shift the liability from the registered owner to the financier of the vehicle.

A similar view was expressed by the same Division Bench in Writ Tax No.217 of 2017 Shriram Transport Finance Company Limited Vs. State of U.P. and 6 others decided on 13.04.2017.

The decision in the case of Lakhimpur Finvest Company Ltd. Vs. State of U.P. and others 2011 (7) ADJ 591 deals with almost similar controversy and holds that from the date of the possession the liability to pay tax is upon the finance company but without considering the impact of Section 9(2) of the U.P. Motor Vehicles Taxation Act, 1997. It in the end directs for representation to be considered and decided in that regard by the Regional Transport Officer obviously for the reason that the court was not in a position to decide about it.

The other decision in the case of Manish Mukhriya Vs. State of U.P. and others 2017 (3) ADJ 62 categorically lays down that under Section 4 of the Motor Vehicles Act, 1988, the tax is payable by the registered owner of the vehicle and once the vehicle is repossessed by the finance company the liability falls upon the finance company as it becomes owner in possession of the vehicle. The aforesaid decision again does not take into account the provisions of Section 9(2) of the U.P. Motor Vehicles Taxation Act, 1997 and Section 51 of the Motor Vehicles Act, 1988 while interpreting the definition of owner of the vehicle.

It is relevant to mention here that the de facto possession of the vehicle does not appear to be very material, rather it is de jure possession which is relevant and important for the purposes casting liability for payment of tax in respect of a motor vehicle covered by a hire-purchase agreement or hypothecation.

In fact, there is no machinery provided under the aforesaid Acts to determine the person who is in possession of the vehicle. Therefore, by necessary implication, the expression "the person in possession" would refer to the person recorded to be in possession as per the records of the transport authorities.

In the event, a person in physical possession of the vehicle is held liable to pay tax it may cause difficulties for the transport authorities to find out the person in possession of the vehicle in absence of any information or proper application regarding the use or transfer of the vehicle so as to saddle him with the liability. Therefore, completion of formalities regarding transfer or change of possession are necessary before shifting the liability of payment of tax from the registered owner to any other person.

In view of the aforesaid facts and circumstances, we are of the opinion that the above two decisions are not of much help to the petitioner.

In the end, the liability to pay tax in respect of a motor vehicle is upon the registered owner and it continues to be with him so long as the higher purchase agreement or hypothecation does not come to an end and steps are taken for the transfer of the name of the registered owner and for getting the name of the person in possession of it recorded in accordance with the Act and the Rules.

The petitioner has filed a representation dated 16.08.2016 disputing his liability to pay tax in respect of the above vehicle after 17.10.2014 in view of Rule 24 of the U.P. Motor Vehicles Taxation Rules, 1998. We therefore, consider it appropriate to direct the taxation officer to deal with the aforesaid representation of the petitioner for exemption or reduction of the penalty in accordance with law most expeditiously, if possible, within three months from the date of presentation of a certified copy of this order.

The writ petition stands disposed of with the aforesaid direction.

Order Date :- 2.8.2017

Brijesh