Liability for tax cannot be imposed on petitioner after the vehicle was taken by financier: Allahabad HC quashed recovery citation against petitioner [Read Order]

The Allahabad High Court quashed the recovery citation against the petitioner and held that the Liability for payment of motor vehicle tax cannot be imposed on the petitioner after the vehicle was taken by the financier.

In this case, the petitioner, Dileep Kumar Upadhyay, had approached the Allahabad High Court challenging the recovery citation dated 16-07-20204, issued against the petitioner, on account of motor vehicle tax.

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Counsel on behalf of the petitioner submitted that that he had purchased a Tata Magic, bearing registration No. UP 96 A 9871. It was hypothecated by the writ petitioner with Hinduja Leyland Finance Limited. The vehicle was seized by the financier in the year 2013 as the petitioner defaulted on the loan.

The counsel contended that the liability of the tax cannot be imposed on the petitioner after the possession of the vehicle was taken by the financier and thus the financier will be liable to pay the tax.

The counsel on behalf of the State submitted that according to Rule 18 of the U.P. Motor Vehicles Taxation Rules, 1998, the petitioner should have informed 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.

The High Court bench found merit in the submissions made by the counsel for the petitioner that the possession of the vehicle in question was taken by the financier in April 2022.

The bench held the liability for payment of tax thereafter cannot be fastened on the petitioner by relying on the judgment of the Supreme Court in the Mahindra and Mahindra Financial Services’ case.

The bench further observed that the petitioner had filed an objection against the notice on 14-03- 2022 according to Rule 18 of the U.P. Motor Vehicles Taxation Rules, 1998, and later on, the vehicle was sold by the financer.

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The bench directed the petitioner to pay tax for the period prior, if not paid.

The High Court bench comprising of Justice Shekhar B. Saraf and Justice Manjive Shukla, quashed the recovery citation against the petitioner.

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