MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD versus STATE OF U.P. AND ORS

Citation: [2022] 16 S.C.R. 428 · Decided: 22-02-2022 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Dismissed

Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 16 S.C.R.
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD.
v.
STATE OF U.P. AND ORS.
(Civil Appeal No. 1217 of 2022)
FEBRUARY 22, 2022
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
U.P. Motor Vehicles Taxation Act, 1997 : ss. 2 (h), 4, 9, 10,
12 and 20 – Payment of tax – Non-use of vehicle and refund of tax
– Financier of motor vehicle/transport vehicle in respect of which
hire-purchase, lease or hypothecation agreement entered – Liability
to pay tax from the date of taking possession of the vehicle –
Appellant – financier extended loan for purchase of transport vehicle
– However, due to default in payment, took back the possession of
the vehicle – As regards, the liability to pay tax under the 1997 Act,
the High Court held that the appellant being in possession of the
transport vehicle liable to pay tax under the 1997 Act – Held:
Financier in possession of the transport vehicle owing to non-
payment of loan amount is an ‘owner’ u/s. 2 (h) of the 1997 Act
read with s. 2(30) of the 1998 Act – 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 u/s. 12
and has to comply with all the requirements for seeking the refund
– However, in a case, under sub-section (2) of s. 12 and subject to
surrender of the necessary documents as mentioned in sub-section
(2) of s. 12, the liability to pay the tax would not arise – Motor
Vehicles Act, 1988.
Dismissing the appeal, the Court
HELD: 1.1 As per Section 2(h) of the U.P. Motor Vehicles
Taxation Act, 1997 read with Section 2(30) of the Motor Vehicles
Act, 1988, even a person in possession of the vehicle under the
hire- purchase agreement or an agreement of sell or an agreement
of hypothecation can also be said to be the “owner”. Therefore,
a financier like the appellant, who is in possession of the transport
[2022] 16 S.C.R. 428
428
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vehicle in question owing to non-payment of the loan amount is
an “owner” under the relevant provisions of the Act, 1997 and
Act, 1988. [Para 8.3][445-D-E]
1.2 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. However, in a case where, after
the tax is paid as per Section 4(2- A) read with Section 9, the
vehicle is not used and there is non-use of the vehicle, the
operator and/or the owner, as the case may be, may apply and
claim for refund as per Section 12 and may get the refund subject
to fulfilling all the requirements as provided under Section 12.
The question of refund will come only when the tax is first paid
and thereafter on non-use, the tax paid is to be refunded, of-
course subject to fulfilling the requirements of claiming the refund
as provided under Section 12 of the Act, 1997. [Para 9, 9.1][446-
G; 447-B, C-D]
1.3 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. There is only
one eventuality where no tax or advance tax under the Act, 1997
shall be payable namely under sub-section (2) of Section 12, where
the operator or, as the case may be, the owner of a motor vehicle,
does not intend to use his vehicle for a period of one month or
more, he shall, before the date the tax or additional tax, as the
case may be, is due, surrender the certificate of registration, the
token, if any, issued in respect of the motor vehicle and the permit,
if any, to the Taxation Officer of the region where the tax or
additional tax was last paid and only on such surrender, no tax or
additional tax under Act, 1997 shall be payable in respect of such
vehicle for each completed calendar m

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