MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTDversusSTATE OF U.P. AND ORS

428                      [2022]REPORTS
               SUPREME COURT   16 S.C.R. 428               [2022] 16 S.C.R.


A      MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD.
                                        v.
                          STATE OF U.P. AND ORS.
                         (Civil Appeal No. 1217 of 2022)
B                            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
C
      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,
D     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
E
      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
F     – 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
G           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,
H     a financier like the appellant, who is in possession of the transport
                                       428
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                        429
             STATE OF U.P. AND ORS.

vehicle in question owing to non-payment of the loan amount is          A
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       B
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            C
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    D
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         E
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         F
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     G
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 month of the period during
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430            SUPREME COURT REPORTS                     [2022] 16 S.C.R.


A     which the vehicle remains withdrawn from use and the aforesaid
      documents remain surrendered with the Taxation Officer. [Para
      10, 10.1][447-E-H; 448-A]
            1.4 The submission that the documents referred to in sub-
      section (2) of Section 12 are not with the financier/owner and
B     they remain with the registered owner and therefore such a
      financier/owner may not be able to get the refund under sub-
      section (1) of Section 12 or exemption from payment of tax as
      per sub- section (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
C     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.
D     Therefore, 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.
      [Para 11][448-B-D]
E            1.5 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
F     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
G     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

H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                              431
             STATE OF U.P. AND ORS.

falls under sub-section (2) of Section 12 and subject to surrender            A
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.
The impugned judgment and order passed by the High Court
does not warrant any interference by this Court. [Para 12][449-
                                                                              B
B-E]
      State of Maharashtra and Ors. v. Sundaram Finance
      and Ors. (1999) 9 SCC 1; Jagir Singh and Ors. v. State
      of Bihar and Ors. (1976) 2 SCC 942 : [1976] 2 SCR
      80; Abdul Samad Abdul Hamid Shaikh v. State of
      Gujarat Special Civil Application No. 5788 of 2012 –                    C
      referred to.
                         Case Law Reference
(1999) 9 SCC 1                    referred to             Para 4.5
[1976] 2 SCR 80                   referred to             Para 5.5            D
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1217
of 2022.
      From the Judgment and Order dated 16.12.2019 of the High Court
of Judicature at Allahabad, Lucknow Bench in Misc. Bench No. 4529
                                                                              E
of 2018.
      Prashant Kumar, Amarjit Singh Bedi, Advs. for the Appellant.
      Ms Garima Prasad, AAG, Pradeep Misra, Suraj Singh, Advs. for
the Respondents.
      The Judgment of the Court was delivered by                              F

      M. R. SHAH, J.
       1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 16.12.2019 passed by the Full Bench of the High Court
of judicature at Allahabad, Bench Lucknow in Writ Petition No. 4529 of        G
2018 by which the High Court has dismissed the said writ petition
preferred by the appellant herein and held that the appellant herein as a
financier-in-possession of the transport vehicle is liable to pay tax under
the U.P. Motor Vehicles Taxation Act, 1997, the original writ petitioner,
the financier has preferred the present appeal. The said financier had
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432             SUPREME COURT REPORTS                          [2022] 16 S.C.R.


A     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.
             2. As above stated, that the appellant – Mahindra and Mahindra
      Financial Services Limited, is a financier, who had extended a loan for
      purchase of a transport vehicle. On default in payment of loan, it had
B     taken the possession of the vehicle in question. The dispute is liability to
      pay tax under the U.P. Motor Vehicles Taxation Act, 1997 (hereinafter
      referred to as the “Act, 1997”) on such financier-in-possession of the
      vehicle. Before the High Court, the following question was referred to
      the Full Bench:-
C           “1. Whether in view of Sections 2(g), 2(h), 4, 9, 10, 12, 13, 14 and
            20 of the Act, 1997 read with Sections 39, 50 and 51 of the Act,
            1988 and other relevant provisions of the said enactments and the
            Rules of 1998 and 1989, 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
D           possession of the said vehicle under the said agreements, even if,
            its name is not entered in the Certificate of Registration or not? If
            not, who is liable in this regard?
            2.1 By the impugned judgment and order, the High Court has held
      against the appellant – financier and has held that the appellant being in
E     possession of the vehicle as a financier is liable to pay tax under the Act,
      1997.
            2.2 Feeling aggrieved and dissatisfied with the impugned judgment
      and order holding that the appellant as a financier-in-possession of the
      transport vehicle in question is liable to pay the tax under the Act, 1997,
F     the appellant – financier has preferred the present appeal.
             3. Shri Prashant Kumar, learned counsel has appeared on behalf
      of the appellant and Ms. Garima Prasad, learned Senior Advocate has
      appeared on behalf of the State of U.P.
             4. Learned counsel appearing on behalf of the appellant has taken
G
      us through the relevant provisions of the Act, 1997 and also the provisions
      of the Motor Vehicles Act, 1988 (hereinafter referred to as “Act, 1988”)
      in support of his submission that being a financier-in-possession of the
      transport vehicle, who has taken the possession of the transport vehicle
      in question on default in payment of the loan, unless the said transport
H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                                433
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

vehicle is put to use and/or is being actually used, there shall not be any     A
liability on the appellant-financier to pay the tax payable under the Act,
1997.
       4.1 Learned counsel appearing on behalf of the appellant has
vehemently submitted that the appellant is the financier, who had extended
a loan for purchase of the transport vehicle in question and on default in      B
payment of the loan, it took possession of the vehicle in question. That
the registered owner had paid all the taxes prior to the date of such
possession by the appellant-financier.
       4.2 It is submitted that the taxes due and payable under the Act,
1997 are on the ‘use’ of the transport vehicle. It is submitted therefore       C
that unless and until the transport vehicle possessed by the financier is
put to use, there shall not be any liability of the financier to pay the tax.
       4.3 It is vehemently submitted by learned counsel appearing on
behalf of the appellant by relying upon Section 4(2-A), Section 6 and
Section 9 that the Scheme of the Act emphasizes the operation of the            D
vehicle specifically a transport vehicle. It is submitted that on the
operation/use of a transport vehicle preliminary and additional tax is
imposed on such a public transport vehicle. It is contended that it is for
this reason, both, the operator and owner of the vehicle are included in
the definition for payment of tax in addition to registered owner. It is
urged therefore that the most important factor is operation/running of a        E
vehicle as a pre-condition for imposition of tax. It is submitted that the
aforesaid condition becomes absolutely essential for the purpose of
Section 12, which provides that even in case the tax is paid in advance
for running of vehicle for a particular period and the same is not actually
run for that period then the refund may be sought and granted in                F
appropriate case. It is submitted that even for the purpose of refund
also, as the financier, who will not be in possession of a token or permit
or the registration certificate will not be in a position to even pray for
refund.
      4.4 It is vehemently submitted by learned counsel appearing on            G
behalf of the appellant that as the original certificate of registration and
the permit would be with the registered owner, the appellant-financier
cannot use the transport vehicle in the absence of having any permit
and/or certificate of registration. Therefore, there cannot be any liability
on the financier to pay the tax imposed under the Act, 1997.
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434             SUPREME COURT REPORTS                           [2022] 16 S.C.R.


A            4.5 Making the above submissions and relying upon a decision of
      this Court in the case of State of Maharashtra and Ors. Vs. Sundaram
      Finance and Ors., (1999) 9 SCC 1, it is prayed to allow the present
      appeal and to hold that the appellant being a financier-in-possession of
      the transport vehicle is not liable to pay any tax under the Act, 1997
      unless it is put to use.
B
            5. Ms. Garima Prasad, learned Senior Advocate appearing on
      behalf of the State has taken us through the entire Scheme of the Act,
      1997. She has submitted that under the provisions of the Act, 1997, every
      “owner” and “operator” are liable to pay tax leviable under Section 4.
C           5.1 It is submitted that the financier, after taking possession of the
      transport vehicle under the agreement – hire purchase or lease or
      hypothecation, becomes the “owner” under Section 2(h) of the Act, 1997.
      That once the financier-in-possession of the transport vehicle becomes
      the “owner”, he is liable to pay the tax leviable under Section 4 of the
      Act, 1997. It is contended that as per Section 2(h) of the Act, 1997 and
D     Section 2(30) of the Motor Vehicles Act, the financier-in-possession can
      be said to be the “owner”.
             5.2 It is further submitted that in the case of ‘motor vehicles other
      than a transport vehicle’, one-time tax is required to be paid at the time
      of registration of the vehicle, without which the vehicle cannot be
E     registered nor can it be used. It is submitted that a case of arrears of tax,
      additional tax and penalty would not arise in such a case. That in the
      case of a “transport vehicle”, since there is no provision of one-time tax,
      operators/owners are required to pay the tax at uniform intervals of time
      as per law. It is submitted that as per Section 9(3) read with Section
F     20(3) both the “owner” and “operator” would be jointly and severally
      liable. It is urged that as far as arrears which are due prior to the financer
      taking the possession, the primarily liability to pay is on the owner or
      operator, and if it is not possible to recover from such a person for any
      reason whatsoever, the same is recoverable from financier, as according
      to Section 20(2), arrears are first charged over the motor vehicle. It is
G     submitted therefore that in order to satisfy the first charge, the person in
      possession is liable to satisfy the same. But since the primarily liability is
      on the registered owner, the financier, after depositing the arrears of tax,
      shall be entitled to recovery of the same as per law.

H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                                 435
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

       5.3 It is submitted by Ms. Garima Prasad, learned Senior Advocate         A
appearing on behalf of the respondent – State of U.P. that Section 4 of
the Act, 1997 is the charging section. That as per Section 4 (2-A) save
as otherwise provided by or under the Act no public service vehicle
other than those referred in sub-section (1-A) and sub-section (2) shall
be USED in any public place in Uttar Pradesh unless a monthly tax at
                                                                                 B
such rate as may be notified by the State Government is paid in respect
thereof. As per the proviso, instead of monthly tax, a quarterly or a
yearly tax may be payable at such rate as may be notified by the State
Government. It is submitted that as per Section 9(1)(iv)(a) the tax payable
under sub-section (2-A) of Section 4 shall be payable in advance for one
calendar month at the time of registration of the vehicle under the Act,         C
1988 and thereafter on or before the fifteenth day of each calendar
month next following. It is submitted that such a tax is required to be
paid in advance and hence the liability to pay the tax is first and then only
can the vehicle be used. Therefore, the financier-in-possession of the
transport vehicle being an “owner”, as defined under the Act, 1997, is
                                                                                 D
liable to first pay the tax. That in case, after the payment of tax, the
vehicle is not used, then, after following the procedure and subject to
compliance of Section 12, such a financier/owner can claim refund of
the tax paid. That the question of refund on non-use will arise only in a
case where the tax is first paid. It is submitted therefore that the liability
to pay the tax would arise first and only thereafter the refund can be           E
claimed under Section 12 of the Act, 1997.
       5.4 So far as the submission on behalf of the appellant-financier
that, as the appellant-financier is not the registered owner and/or the
registration is not transferred in favour of the appellant-financier and the
original permit and certificate of registration of the vehicle, which would      F
be in the name of the registered owner will be with the registered owner
and therefore the appellant-financier even cannot claim the refund is
concerned, it is contended that it is for the financier, while taking the
possession, to ensure that all the documents are seized. Even the financier
can also pray for another certificate of registration as per the provisions
of the Act, 1988. It is submitted that on the aforesaid ground, the liability    G
of the financier-in-possession as an “owner” to pay the tax in advance
as per Section 4(2-A) read with Section 9(1)(iv)(a) would not cease.
      5.5 Learned Senior Advocate appearing on behalf of the State
has heavily relied upon the decision of this Court in the case of Jagir
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436            SUPREME COURT REPORTS                          [2022] 16 S.C.R.


A     Singh and Ors. Vs. State of Bihar and Ors., (1976) 2 SCC 942 :
      1976 (2) SCR 80 and the decision of the Gujarat High Court dated
      25.01.2017 in Abdul Samad Abdul Hamid Shaikh Vs. State of Gujarat,
      Special Civil Application No.5788 of 2012 in support of her submission
      that the financier-in-possession of the vehicle can be said to be the
      “owner” and is liable to pay the tax in advance and the only remedy
B
      available to such a financier is to claim refund in case of vehicle is not
      used, otherwise he is liable to pay the tax dues.
            5.6 Making the above submissions and relying upon above
      decisions, it is prayed to dismiss the present appeal.
C           6. Heard the learned counsel for the respective parties at length.
             7. The issue before this Court is, 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.
D           8. While deciding the present issue, the relevant provisions of the
      U.P. Motor Vehicles Taxation Act, 1997 are required to be referred to
      and considered. They are Sections 2(h), 4, 9, 10, 12 and 20, which read
      as under:-
            “2(h) “owner” in respect of a motor vehicle means the person
E           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;
F           4. Imposition of tax.- (1) Save as otherwise provided in this Act
            or the rules made thereunder, 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 in respect of such
            motor vehicle, as may be specified by the State Government by
            Notification in the Gazette has been paid in respect thereof:
G
                  Provided that in respect of an old motor vehicle instead of
            a one time tax, annual tax applicable to such motor vehicle as
            may be specified by the State Government by Notification in the
            Gazette may be paid.
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MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                          437
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

          (1-A) Save as otherwise provided in this Act or the rules       A
    made thereunder no three wheeler motor cab and goods carnage
    having gross vehicle weight not exceeding 3000 kilograms, shall
    be used in any public place in Uttar Pradesh unless yearly tax at
    such rate of such motor vehicle, as may be specified by the State
    Government by notification in the Gazette, has been paid in respect
                                                                          B
    thereof:
          Provided that in respect of a motor vehicle under this sub-
    section in lieu of yearly tax such amount of one time tax may be
    payable as specified by the State Government by notification in
    the Gazette.
                                                                          C
           Provided also that from the date of commencement of the
    Uttar Pradesh Motor Vehicles Taxation (Amendment) Act, 2014
    no motor vehicle other than a transport vehicle shall be used in
    any public place after the expiry of validity of registration under
    the Motor Vehicles Act, 1988 unless a green tax at the rate
    applicable to such Motor Vehicles as may be specified by              D
    notification, by the State Government has been paid in respect
    thereof.
          (2) Save as otherwise provided by or under this Act no
    goods carriage other than those specified in sub-section (1-A),
    construction equipment vehicles, specially designed vehicles,         E
    motor cab (other than three wheeler motor cab), maxi cab and
    public service vehicles owned or controlled by the State Transport
    Undertaking, shall be used in any public place in Uttar Pradesh
    unless a quarterly tax at the rate applicable to such motor vehicle
    as may be specified by the State Government by notification in        F
    the Gazette, has been paid in respect thereof:
          Provided that in respect of a motor vehicle under this sub-
    section instead of quarterly tax, an yearly tax at such rate as may
    be specified by the State Government may be payable.
           (2-A) Save as otherwise provided by or under this Act no       G
    public service vehicle other than those referred 1n subsection (1-
    A) and sub-section (2) shall be used in any public place in Uttar
    Pradesh unless a monthly tax at such rate as may be notified by
    the State Government is paid in respect thereof:
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438      SUPREME COURT REPORTS                          [2022] 16 S.C.R.


A            Provided that in respect a motor vehicle under this sub-
      section instead of monthly tax, a quarterly or an yearly tax at such
      rate as may be notified by the State Government may be payable.
             (2-B) Where any reciprocal agreement relating to taxation
      of goods carried by road is entered into between the Government
B     of Uttar Pradesh and any other State Government or a Union
      Territory, the levy of tax under sub-section (1-A) or sub-section
      (2) shall, notwithstanding anything contained in the said sub-section,
      be in accordance with the terms and conditions of such agreement:
            Provided that the tax so levied shall not exceed the tax
C     which would otherwise been levied under the Act.
             (3) Where any motor vehicle other than a transport vehicle
      is found plying as a transport vehicle, such tax therefore as may
      be notified by the State Government, shall be payable.
             (4) The State Government may, by notification, increase by
D     not more than fifty percent, the rates of tax, specified in Part ‘B’,
      Part ‘C’ or Part ‘D’ of the First Schedule.
            9. Payment of tax and penalty—(1) Subject to the
      provisions of Section 11—
            (i) the tax payable under sub-section (1) of section 4 shall
E
      be paid at the time of the registration of the vehicle under the
      Motor Vehicles Act, 1988:
             Provided that in respect of an old motor vehicle, the tax
      shall be payable in advance on or before the fifteenth day of January
      in each year;
F
             (ii) the tax payable under sub-section (1-A) of Section 4,
      shall be payable in advance for one year at the time of the
      registration of the vehicle under the Motor Vehicles Act, 1988
      and thereafter on or before be fifteenth day of the first calendar
      month of the each year next following.
G
             (iii) the tax payable under sub-section (2) of Section 4 shall
      be payable in advance for one quarter at the time of registration
      of the vehicle under the Motor Vehicles Act, 1988 and thereafter
      on or before the fifteenth day of the first calendar month of the
      each quarter next following.”
H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                               439
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

           (iv) (a) the tax payable under sub-section (2-A) of Section         A
    4 shall be payable in advance for one calendar month at the time
    of registration of the vehicle under the Motor Vehicles Act, 1988
    and thereafter on or before the fifteenth day of each calendar
    month next following.
           (b) the special tax payable under Section 4A in respect of          B
    vehicles covered by temporary permit issued for the conveyance
    of passengers on special occasions, such as to and from fairs and
    religious gatherings or to carry marriage parties, tourist parties or
    such other reserved parties shall be paid at the time of issuance
    of such temporary permit.
                                                                               C
            (2) When any person transfers a motor vehicle registered
    in his name to any other person, then without prejudice to the
    liability of the transfer or in this regard, the transferee shall be
    liable to pay the arrears of tax, additional tax and penalty, if any, in
    respect of the motor vehicle so transferred, due on or before the
    date of its transfer, as if the transferee was the owner of the said       D
    motor vehicle during the period for which such tax, additional tax
    or penalty is due.
           (3) Where the tax or additional tax in respect of a motor
    vehicle is not paid within the period specified in sub-section (1), in
    addition to the tax or the additional tax due, a penalty at such rate      E
    not exceeding the due amount as may be prescribed, shall be
    payable, for which the owner and the operator if any shall be
    jointly and severally liable.
           (4) In computing the amount of tax, additional tax or penalty
    under this Act the amount shall be rounded off to the nearest              F
    rupee, that is to say a fraction of a rupee being fifty paise or more
    shall be rounded off to the next higher rupee and any fraction less
    than fifty paise shall be ignored.
          10. Vehicles not to be used in Uttar Pradesh without
    payment of tax— (1) Notwithstanding anything contained in                  G
    Section 9, no transport Vehicle shall ply in Uttar Pradesh—
          (a) under a temporary permit granted under the Motor
    vehicles Act, 1988 by an authority having jurisdiction outside Uttar
    Pradesh unless there has been paid in respect thereof a tax under
    Section 4 for its use or stay in Uttar Pradesh.                            H
440      SUPREME COURT REPORTS                            [2022] 16 S.C.R.


A            (b) under a national permit granted under sub-section (12)
      of Section 88 of the said Act by an authority having jurisdiction
      outside Uttar Pradesh unless there has been paid in respect thereof
      a tax under Section 4 calculated at the rate specified by the State
      Government by Notification in the Gazette in the manner
      prescribed.
B
             (c) under a permit granted under sub-section (9) of Section
      88 of the said Act read with the Motor Vehicles (An India Permit
      for Tourist Transport Operators) Rules, 1993 by an authority having
      jurisdiction outside Uttar Pradesh unless there has been paid in
      respect thereof a tax under Section 4 at the rate specified by the
C     State government by notification in the Gazette in the manner
      prescribed:
             Provided that the State Government may, by notification,
      increase by not more than fifty per cent, the rates of tax or additional
      tax, as the case may be, specified in the said Schedules.
D
             (2) For the purpose of levy and payment of tax under sub-
      clause (i) of clause (a) of sub-section (1), the tax payable for any
      two weeks or part thereof shall be 2/13th of the rate specified in
      the First Schedule.

E            (3) In such transport vehicle is found plying in Uttar Pradesh
      without payment of the tax or additional tax payable under this
      Act such tax or additional tax along with a penalty, equivalent to
      five times of the due tax shall be payable.
             Provided that the tax under this section shall not be payable
F     in respect of Motor Cabs plying exclusively within the notified
      area of Noida, Greater Noida and Ghaziabad Development
      Authority from Delhi on the basis of permit issued by the Transport
      Authorities of National Capital Territory Delhi.
            Provided further that the tax under this section shall not be
      payable in respect of motor cabs (CNG operated) plying
G
      exclusively with the limits of National Capital Region under the
      permit granted as per agreement entered into with the
      Governments of Uttar Pradesh, Haryana, Rajasthan and the
      National Capital Territory of Delhi.

H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                              441
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

           12. Non-use of vehicle and refund of tax—(1) When                  A
    any person who has paid the tax in respect of a transport vehicle,
    proves to the satisfaction of the Taxation Officer in the prescribed
    manner that the motor vehicle in respect whereof such tax has
    been paid, has not been used for a continuous period of one month
    or more since the tax was last paid, he shall be entitled to a refund
                                                                              B
    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:
           Provided that no such refund shall be admissible unless such
    person has surrendered the certificate of registration, the token, if     C
    any, issued in respect of the vehicle and the permit, if any, to the
    Taxation Officer, before the period for which such refund is
    claimed.
          Provided further that where one time tax has been paid for
    a motor vehicle under sub-section (I-A) of Section 4, the amount          D
    equivalent to 1/120 for each month shall be refunded in respect of
    such vehicle.
           (2) 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      E
    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 on such surrender, no
    tax or additional tax under this Act shall be payable in respect of       F
    such vehicle for each complete calendar month of the period during
    which the vehicle remains withdrawn from use and the aforesaid
    documents remain surrendered with the Taxation Officer:
           Provided that in case such vehicle is found plying during
    the period when its documents as mentioned in this sub-section            G
    remain surrendered with the Taxation Officer, such owner or
    operator, as the case may be, shall be liable to the tax and the
    additional tax as if the documents were not surrendered and shall
    also be liable to the penalty equivalent to five times of the tax and
    additional tax.
                                                                              H
442      SUPREME COURT REPORTS                           [2022] 16 S.C.R.


A            (3) Where the owner of a motor vehicle in respect whereof
      one-time tax has been paid under this Act proves to the satisfaction
      of the Taxation Officer in prescribed manner that such motor
      vehicle has not been used for a continuous period of one month or
      more, he shall be entitled to a refund of such tax as may be specified
      by the State Government by notification in the Gazette for the
B
      said period:
             Provided that no such refund shall be admissible, unless the
      certificate of registration and the token, if any, issued in respect
      of the vehicle are surrendered by the owner with the Taxation
      Officer:
C
            Provided further that the total amount of refund under this
      sub-section shall not exceed the one-time tax paid under this Act.
            (4) In calculating the amount of refund under sub-section
      (3) any portion of the period being less than a month, shall be
D     ignored.
              (5) The owner of a motor vehicle other than a transport
      vehicle, in respect whereof one-time tax has been paid under this
      Act shall be entitled to refund of such tax at the rates specified by
      the State Government by notification in the Gazette on the ground
E     that he has, after payment of such tax, paid tax in respect of such
      vehicle under any enactment relating to any tax on motor vehicles
      in any other State or Union Territory as a consequence of such
      vehicle having been brought over permanently to such other State
      or Union Territory or that such motor vehicle has been converted
      into a transport vehicle or that the registration of such motor vehicle
F     has been cancelled.
             (6) Where any person who has paid the tax other than one-
      time tax in respect of an old motor vehicle, proves to the satisfaction
      of the Taxation Officer that the motor vehicle, in respect of which
      such tax has been paid, has not been used for a continuous period
G     of one month or more since the tax or installment was last paid,
      he shall be entitled to-a refund of an amount equal to one-twelfth,
      of the rate of annual tax payable in respect of such vehicle for
      each complete calendar month of such period for which such tax
      has been paid:
H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                              443
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

             Provided that no such refund shall be admissible unless such     A
      person has surrendered the certificate of registration and the token,
      if any, issued in respect of the vehicle to the Taxation Officer,
      before the period for which such refund is claimed.
             (7) An operator of a transport vehicle entitled to any refund
      of tax under sub-section (1), shall also be entitled to refund of       B
      such portion of the additional tax paid under Section 6, as is
      attributable to the period for which he is entitled to refund under
      sub-section (1); and the amount of. such refund shall be calculated
      on the same principle as is laid down in the said sub-section.
             (8) Where the operator, or as the case may be, the owner         C
      of a motor vehicle is unable to use his motor vehicle due to an
      accident of the said vehicle and the certificate of registration, the
      token, if any, issued in respect of the said vehicle and the permit,
      if any are surrendered to the Taxation Officer within a week from
      the date of such accident together with a copy of the first
      information report, such surrender shall be deemed to have been         D
      made on the date of the accident.
             20. Recovery of tax—(1) Arrears of any tax or additional
      tax or penalty payable under this Act shall be recoverable as arrears
      of land revenue.
                                                                              E
            (2) The tax, the additional tax and penalty payable under
      this Act shall be first charge on the motor vehicle including its
      accessories, in respect whereof it is due.
             (3) The Taxation Officer shall raise a demand in the form
      as may be prescribed, from the owner or operator, as the case           F
      may be, for the arrears of tax and additional tax and penalty of
      each year, which shall also include the arrears of tax, additional
      tax or penalty, if any, of preceding years.”
      8.1 Section 2(30) the Motor Vehicles Act defines “owner”, which
reads as under:-
                                                                              G
      (30) “owner” means a person in whose name a motor vehicle
      stands registered, and 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;”                                          H
444            SUPREME COURT REPORTS                           [2022] 16 S.C.R.


A            8.2 Section 51 of the Motor Vehicles Act provides for special
      provisions regarding motor vehicle subject to hire-purchase agreement,
      etc. Section 51(1) to Section 51(5) reads as under:-
                   “51. Special provisions regarding motor vehicle
            subject to hire-purchase agreement, etc.—(1) Where an
B           application for registration of a motor vehicle which is held under
            a hire-purchase, lease or hypothecation agreement (hereafter in
            this section referred to as the said agreement) is made, the
            registering authority shall make an entry in the certificate of
            registration regarding the existence of the said agreement.
C                   (2) Where the ownership of any motor vehicle registered
            under this Chapter is transferred and the transferee enters into
            the said agreement with any person, the last registering authority
            shall, on receipt of an application in such form as the Central
            Government may prescribe from the parties to the said agreement,
            make an entry as to the existence of the said agreement in the
D           certificate of registration 2 and an intimation in this behalf shall be
            sent to the original registering authority if the last registering
            authority is not the original registering authority.
                   (3) Any entry made under sub-section (1) or sub-section
            (2), may be cancelled by the last registering authority on proof of
E           the termination of the said agreement by the parties concerned on
            an application being made in such form as the Central Government
            may prescribe and an intimation in this behalf shall be sent to the
            original registering authority if the last registering authority is not
            the original registering authority.
F                  (4) No entry regarding the transfer of ownership of any
            motor vehicle which is held under the said agreement shall be
            made in the certificate of registration except with the written
            consent of the person whose name has been specified in the
            certificate of registration as the person with whom the registered
G           owner has entered into the said agreement.
                   (5) Where the person whose name has been specified in
            the certificate of registration as the person with whom the registered
            owner has entered into the said agreement, satisfies the registering
            authority that he has taken possession of the vehicle from the
            registered owner owing to the default of the registered owner
H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                                445
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

      under the provisions of the said agreement and that the registered        A
      owner refuses to deliver the certificate of registration or has
      absconded, such authority may, after giving the registered owner
      an opportunity to make such representation as he may wish to
      make (by sending to him a notice by registered post
      acknowledgement due at his address entered in the certificate of
                                                                                B
      registration) and notwithstanding that the certificate of registration
      is not produced before it, cancel the certificate and issue a fresh
      certificate of registration in the name of the person with whom
      the registered owner has entered into the said agreement:
            Provided that a fresh certificate of registration shall not be
      issued in respect of a motor vehicle, unless such person pays the         C
      prescribed fee:
             Provided further that a fresh certificate of registration issued
      in respect of a motor vehicle, other than a transport vehicle, shall
      be valid only for the remaining period for which the certificate
      cancelled under this sub-section would have been in force.”               D

       8.3 As per Section 2(h) of the Act,1997 read with Section 2(30)
of the 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 vehicle in question   E
owing to non-payment of the loan amount is an “owner” under the relevant
provisions of the Act, 1997 and Act, 1988.
      8.4 Section 4 of the Act, 1997 is the charging section. As per
Section 4, 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          F
applicable in respect of such motor vehicle has been paid in respect
thereof. Section 4 (2-A) provides that no public service vehicle (transport
vehicle) other than those referred in sub-section (1-A) and sub-section
(2) SHALL BE USED in any public place in Uttar Pradesh unless a
monthly tax at such rate as may be notified by the State Government is          G
paid in respect thereof. It further provides that in respect of a motor
vehicle under Section 4(2-A) instead of monthly tax, a quarterly or a
yearly tax at such rate as may be notified by the State Government may
be payable. Section 9 provides for payment of tax and penalty. As per
Section 9(1)(iv)(a) the tax payable under sub-section (2-A) of Section 4
                                                                                H
446             SUPREME COURT REPORTS                            [2022] 16 S.C.R.


A     shall be payable in advance for one calendar month at the time of
      registration of the vehicle under the Motor Vehicles Act, 1988 and
      thereafter on or before the fifteenth day of each calendar month next
      following. Section 12 provides for non-use of vehicle and refund of tax.
      As per Section12(1) when any person who has PAID THE TAX in
      respect of a transport vehicle, proves to the satisfaction of the Taxation
B
      Officer in the prescribed manner that the motor vehicle in respect
      whereof SUCH TAX HAS BEEN PAID, has not been USED for a
      continuous period of one / month or more since the tax was last paid, he
      shall be entitled to a 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
C     in respect of such vehicle for each thirty days of such period for which
      such tax has been paid. However, Section 12(2) provides that 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
D
      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 on such surrender,
      no tax or additional tax under Act, 1997 shall be payable in respect of
      such vehicle for each complete calendar month of the period during
      which the vehicle remains withdrawn from use and the aforesaid
E     documents remain surrendered with the Taxation Officer. As per proviso
      to sub-section (2) of Section 12 in case such vehicle is found plying
      during the period when its documents as mentioned in sub-section (2) of
      Section 12 remain surrendered with the Taxation Officer, such owner or
      operator, as the case may be, shall be liable to tax and additional tax as
      if the documents were not surrendered and shall also be liable to penalty
F
      equivalent to five times of the tax and additional tax.
             9. On a conjoint reading of the aforesaid provisions, it can be seen
      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.
G
             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
H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                                447
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

Government is paid in respect thereof. As per Section 9(1)(iv)(a), the          A
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,
                                                                                B
the submission on behalf of the appellant-financier that tax has to be
paid at the time of use or thereafter cannot be accepted. 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.
       9.1 However, in a case where, after the tax is paid as per Section       C
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            D
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.
       10. The sum and substance of the aforesaid discussion would be
that the owner or operator has to first pay the tax in advance and              E
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.           F

       10.1 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      G
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         H
448             SUPREME COURT REPORTS                          [2022] 16 S.C.R.


A     month of the period during which the vehicle remains withdrawn from
      use and the aforesaid documents remain surrendered with the Taxation
      Officer.
              11. 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
B     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
      sub-section (1) of Section 12 or exemption from payment of tax as per
      sub-section (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,
C     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. Therefore,
      before seeking refund under sub-section (1) of Section 12 or before he
D     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.
            11.1 An identical question came to be considered by the Gujarat
      High Court in the case of Abdul Samad Abdul Hamid Shaikh (supra),
E     where in paragraphs 5.3 and 5.4, it is observed and held as under:-
            “5.3       ………………………..If the vehicle is repossessed by
            the financier subsequently, in that case the remedy available to
            such financier would be by submitting an appropriate application
            before the appropriate authority of non-use of such vehicle and
F           for the period of such non-use the liability to pay the tax shall not
            arise. Otherwise, the liability to pay the tax continues.
            5.4 Section 4(1) of the Act, 1958 provides that the tax is required
            to be paid in advance by every registered owner, or any person
            having possession or control, of such motor vehicles. Section 8 of
G           the Act, 1958 provides that if the tax leviable in respect of any
            motor vehicle remains unpaid by any person liable for the payment
            thereof, and such person before having paid the tax has transferred
            the ownership of such vehicle or has ceased to be in possession
            or control of such vehicle, the person to whom the ownership of
            the vehicle has been transferred or the person who has possession
H
MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. v.                                   449
       STATE OF U.P. AND ORS. [M. R. SHAH, J.]

       or control of such vehicle shall also be liable to pay the said tax to      A
       the Taxation Authority………………….”
       12. 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           B
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         C
(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.              D
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.
       Under the circumstances, the impugned judgment and order passed             E
by the Full Bench of the High Court does not warrant any interference
by this Court. The appeal stands dismissed accordingly. However, in the
facts and circumstances of the case, there shall be no order as to costs.

Nidhi Jain and Amarendra Kumar                                 Appeal dismissed.   F
(Assisted by : Iram Jan, LCRA)




                                                                                   G




                                                                                   H