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2008 DIGILAW 1101 (MAD)

Deccan Finance Ltd. v. Regional Transport Officer

2008-03-28

S.MANIKUMAR

body2008
JUDGMENT S. Manikumar, J. 1. Deccan Finance Ltd., represented by its Deputy Managing Director, Financier of the vehicle, bearing Registration No. TN 27 J 5400, has challenged the order, dated 3-1-2003, passed by the Regional Transport Officer, Salem, respondent herein, by which, a sum of Rs. 1,62,050/-has been demanded towards Motor Vehicles Tax for the period between 1-10-2003 and 31-12-2003. 2. The respondent has not filed any counter affidavit and therefore, the Writ Petition is disposed of on the merits of the case. 3. Facts leading to the Writ Petition are as follows: The petitioner is the financier of the vehicle bearing Registration No. TN 27 J 5400, which is an omni bus, having All India Permit. They entered into a hire purchase agreement with Thiru S. Sukumar of Salem. He was operating the said vehicle under a permit obtained in his name. A show cause notice, dated 6-11-2003 was served on the petitioner, calling upon them to explain as to why tax due for the period 1-7-2003 to 30-9-2003 together with penalty thereon should not be collected. In response to the said notice, the petitioner submitted an explanation, pointing out that they are only Financiers and not the owner of the vehicle, as per the Motor Vehicles Act. In spite of the valid explanation offered by the petitioner the respondent has chosen to pass the impugned order, stating that revenue recovery proceedings would be initiated against him to recover tax dues amounting to Rs. 1,62,050/-. 4. Assailing the impugned order, learned Counsel for the petitioner submitted that the respondent has failed to note that as per Section 2(30) of the Motor Vehicles Act, 'owner' means, a person in whose name a motor vehicle stands registered and in relation to a motor vehicle, which is the subject-matter of a hire-purchase agreement, the person in possession of the vehicle under the agreement. Referring to the show cause notice, dated 6-11-2003, he submitted that the All India Permit for the said vehicle in the name of Thiru S. Sukumar, valid up to 12-12-2005 and it was operated by him during its period of validity and therefore, the impugned order, calling upon the financier, who was not in possession of the vehicle, to pay tax is Illegal and contrary to Section 2(30) of the Motor Vehicles Act. 5. 5. Learned Counsel for the petitioner further submitted that when the possession of the vehicle was specifically denied by the petitioner, the respondent ought to have conducted an enquiry and giving a finding with regard to the possession of the vehicle and as per Section 2(30) of the Act, tax can be collected only from the person in possession of the vehicle under the hire-purchase agreement. 6. Referring to the joint application submitted under Section 82 of the Act to the Regional Transport Authority, Chennai, for transfer of permit in respect of the abovesaid vehicle, from the name of Thiru. S. Sukumar, Proprietor, N.S. Road Lines in favour of Thiru. P. Sekar, Chennai and the affidavit of undertaking filed by Thiru. P. Sekar, in the year 2001, learned Counsel for the petitioner submitted that the vehicle in question was in possession of the latter and therefore, as per the provisions of the Motor Vehicles Taxation Act, tax can be levied only from the owner of the vehicle and not from the Financier. He also submitted that as between the petitioner and Thiru. P. Sekar, transferor of the permit, Thiru. Sekar is liable to pay the tax and other dues to the government and not the Financier. 7. Pointing out the entries in the Certificate of Registration, showing Thiru. S. Sukumar as the - Registered owner of the vehicle, learned Counsel for the petitioner submitted that the demand raised, on the basis of the hire-purchase agreement, is liable to be set aside, in this context, he also relied on a decision of this Court in Sundaram Finance Limited v. The R.T.O. Madurai reported in 1993 W LR 898. 8. Per contra, referring to the hire-purchase agreement 'and the entries in the records, Mr. C. Ramesh, learned Additional Government Pleader submitted that the financier would remain as the owner of the vehicle, until the amounts due under the hire-purchase agreement are paid by the hirer and therefore, the petitioner is liable to pay the tax for the period in dispute. He further submitted that the explanation of the petitioner has been duly considered, while passing the impugned order and for nonpayment of the Motor Vehicle Tax, the authorities are empowered to initiate proceedings under the provisions of the Revenue Recovery Act. Hence, prayed for dismissal of the Writ Petition. 9. He further submitted that the explanation of the petitioner has been duly considered, while passing the impugned order and for nonpayment of the Motor Vehicle Tax, the authorities are empowered to initiate proceedings under the provisions of the Revenue Recovery Act. Hence, prayed for dismissal of the Writ Petition. 9. Heard the learned Counsel for the parties and perused the materials available on record. 10. The show cause notice, dated 6-11-2003, issued to the petitioner reads as follows: The All India Tourist Omni Bus TN 27 J 5400 belonging to Thiru. S. Sukumar/Salem, have valid permit up to 12-12-2005. Tax has been paid up to 30-6-2003 and the tax for the period from 1-7-2003 to 30-9-2003 was not paid till date. As per this office records, it is found that the vehicle TN 27 J 5400 was covered by valid hire-purchase agreement with you. As per Section 2(30) of the Motor Vehicles Act, 1988 "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 any agreement of hypothecation, the person in possession of the vehicle under the agreement. You are liable to pay the tax due with penalty of Rs. 2,16,000/- as stated below: ----------------------------------------------------------------------- Vehile No. Period Tax due Penalty Total Rs. Rs. ----------------------------------------------------------------------- TN 27 J 5400 01-07-2003 100% to 1,09,000/- 1,08,000/- 2,16.000/- 30-9-2003 ----------------------------------------------------------------------- Therefore, you are requested to explain as to why the tax due with penalty of Rs. 2,16,000/- as detailed above for the period from 1-7-2003 to 30-9-2003 shall not be collected under Section 8 of the T.N.M.V. Taxation Act, 1978 read with Section 88 of the T.N.M.V. Taxation Act, 1974, within a period of 10 days from the date of receipt of this memo, failing which, action will be taken to collect the arrears under the R.R. Act. 11. In response to the above, the petitioner in his explanation has stated that he is only a financier of the vehicle and not owner. The petitioner has further submitted that the vehicle was not in his custody and therefore, they are not liable to pay tax as per the demand. 12. 11. In response to the above, the petitioner in his explanation has stated that he is only a financier of the vehicle and not owner. The petitioner has further submitted that the vehicle was not in his custody and therefore, they are not liable to pay tax as per the demand. 12. Section 2(30) of the Motor Vehicles Act, defines the word "owner" and it reads as follows: (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. 13. Though the name of the registered owner is shown as Thiru. S. Sukumar, Salem in the certificate of Registration in Form 23 of Rule 48 of the Tamil Nadu Motor Vehicles Rules and a joint application has been filed by Thiru. S. Sukumar, Proprietor, N.S. Roadlines, Salem and Thiru. P. Sekar, Madras for transfer of permit in respect of vehicle in question to the latter", the Regional Transport Authority, Salem has issued a show cause notice only to the Financier, viz., the petitioner. 14. Perusal of the show cause notice, does not indicate as to whether any steps were taken by the department to recover the tax and penalty from the hirer. When the vehicle was stated to have been used by the hirer, pursuant to an agreement, the respondent ought to have conducted an enquiry, as regards to the possession and taken steps to recover tax and penalty from the person, said to have used the vehicle on road. Even as per the definition of owner under the Motor Vehicles Act. In relation to a motor vehicle, which is the subject-matter of an hire-purchase agreement or an agreement of lease or an agreement of Hypothecation, the person in possession of the vehicle under that agreement is the owner of the vehicle. Though the petitioner has claimed to have submitted an explanation, denying their liability, the impugned order does not reflect examination of the same. 15. Let me now consider the judgment relied on by the learned Counsel for the petitioner in Sundaram Finance Limited v. The R.T.O. Madurai reported in 1993 Writ LR 898. Though the petitioner has claimed to have submitted an explanation, denying their liability, the impugned order does not reflect examination of the same. 15. Let me now consider the judgment relied on by the learned Counsel for the petitioner in Sundaram Finance Limited v. The R.T.O. Madurai reported in 1993 Writ LR 898. The facts of the above reported case are that the petitioner, a hire-purchase financing company filed the Writ Petition seeking for a direction to the Regional Transport Officer therein, the 1st respondent, to issue a fresh Registration Certificate under Section 51(5) of the Motor Vehicles Act in relation to the vehicle, which the petitioner re-possessed in exercise of his paramount right conferred under the hire purchase agreement. In order to claim exemption of motor vehicles tax and the permit tax, the petitioner therein had intimated the 1st respondent the fact of re-possession and also the stoppage of the vehicle. He had sent stoppage reports to the 1st respondent. The petitioner had filed Form No. 36, dated 19-3-1992 for cancellation of the Registration Certificate and for issue of a fresh Registration Certificate in the name of the petitioner company under Section 51(5) of the Act. It was further stated that the first respondent returned Form No. 36 to the petitioner and refused to accept the application for issue of fresh Registration Certificate on the ground that the petitioner had to pay composite tax. 16. It was contended on behalf of the 1st respondent that under Sections 3, 4 and 8 of the Tamil Nadu Motor Vehicles Taxation Act, 1974, the permit holder was liable to pay tax for the vehicles used actually or kept for use factually, and in the case of non-use of the vehicles, it should be properly intimated in time and permission has to be obtained for the entire period of stoppage or otherwise, the liability to pay the tax rests with the permit holders/the possessor of the vehicle, as the case may be. It was also submitted by the State that the financier, being the successor of the vehicle, had not obtained any permission after submitting the prescribed applications with the payment of prescribed fee but only intimated the fact of re-possession of the vehicle and therefore, the financier had failed to fulfill the requirements of the law. It was also submitted by the State that the financier, being the successor of the vehicle, had not obtained any permission after submitting the prescribed applications with the payment of prescribed fee but only intimated the fact of re-possession of the vehicle and therefore, the financier had failed to fulfill the requirements of the law. After analysing the provisions of the Motor Vehicles Taxation Act, this Court at Paragraphs 22 and 23, held as follows: 22. Though the petitioner is the owner of the vehicle under the hire-purchase transaction for the purpose of the Act, the hirer who has registered himself as registered owner under the Act is liable for all taxes payable with reference to the vehicle. He is the person who is in control and possession of the vehicle. The financier's rights are recognised under the Act. Prior to the present Act, the Motor Vehicles Act, 1939, was in force and Section 31-A of the old Act provides for the endorsement of the transaction of hirepurchase in the Registration Certificate and also entitlement of the financier to seek for a fresh Registration Certificate in the event of the registered owner (hirer) not surrendering his Registration for issue of a fresh Registration Certificate. The Act also recognises the right of repossession with reference to the vehicle which has the permit. Section 66(3)(o) of the Act provides that the financier is not necessarily to hold the permit to take the vehicle from place of repossession from the hirer to the place of garage. Therefore, the financier cannot be considered as a permit holder under the Act. The permit holder is a distinct expression used under the Act and the person in whose name the permit is given with reference to the vehicle is the permit holder. Whenever certain compliances are to be made by the permit holder, it is the person in whose name the permit was granted, who alone can comply with it. The said provision cannot be insisted upon the persons other than a permit holder. In the counter-affidavit, one of the contentions of the 1st respondent was, that no stoppage intimation is given under Rule 172(6) of the Rules. From a perusal of the said Rule, it would be noticed that the said Rule is intended to be complied by the permit holder. In the counter-affidavit, one of the contentions of the 1st respondent was, that no stoppage intimation is given under Rule 172(6) of the Rules. From a perusal of the said Rule, it would be noticed that the said Rule is intended to be complied by the permit holder. There is no provision under the Act by which the financier could intimate to the Registering Authority of non use of the vehicle. Therefore, the manner of intimation in writing cannot be insisted upon in any particular for in the absence of such form not having been prescribed under the rules or under the, Motor Vehicles Taxation Act or Rules framed thereunder. Therefore, the intimation made the petitioner as the financier by writing letters to the Registering Authority about stoppage of the vehicle and complying with the requirement of non-use of the vehicle on the road, the petitioner is not liable to pay tax when the vehicle is not used or put on road. 23. Section 2(30) of the Act defines 'owner' as a person in whose name a motor vehicle stands registered, and where such a person is a minor, the guardian of such 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. Section 2(31) of the Act defines 'permit' means a permit issued by a State or Regional Transport Authority or an authority prescribed in this behalf under this Act authorising the use of a motor vehicle is a transport vehicle. Section 51(1) of the Act provides that where an 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. Ultimately, this Court in the above reported case held that the order of the Regional Transport Officer, Madurai, rejecting the application of the Financier, to issue a fresh Registration Certificate, as illegal and consequently, directed the respondents therein to issue fresh Registration Certificate to the Financier. 17. Ultimately, this Court in the above reported case held that the order of the Regional Transport Officer, Madurai, rejecting the application of the Financier, to issue a fresh Registration Certificate, as illegal and consequently, directed the respondents therein to issue fresh Registration Certificate to the Financier. 17. Though the above reported judgment is with reference to non-issuance of a fresh Registration Certificate to the Financier, who re-possessed the vehicle in terms of the hire-purchase agreement, having regard to the fact that the permit stood in the name of the hirer, this Court held that whenever certain compliances have to be made by the permit holder, it is the person in whose name the permit was granted, alone can comply with it and that the provision cannot be insisted upon the persons other than a permit holder. Further, when Section 2(30) of the Motor Vehicles Act, clearly defines the word "owner" to mean the person in possession of the vehicle, pursuant to the hire-purchase agreement, tax cannot be demanded from the financier, who was neither the permit holder nor the user of the vehicle. There is nothing on record to indicate that the petitioner had re-possessed the vehicle, either from Thiru. S. Sukumar, Proprietor of N. S. Roadlines, or Thiru. S. Sekar, who become the subsequent hirer of the vehicle and used the vehicle during the validity of the permit. In the absence of any verification as to the possession of the vehicle and recording a finding to that effect, mulcting the liability on the financier to pay Motor Vehicles Tax and penalty for the period stated in the impugned order, is contrary to the statutory provisions and the judgment of this Court in Sundaram Finance Limited's case. 18. Therefore, in the light of the above decision and having regard to the facts of this case, the demand made to the petitioner to pay a sum of Rs. 1,62,050/- towards tax and penalty is liable to be set aside. Accordingly, the impugned order is set aside. The Writ Petition is allowed. No costs. Consequently, connected Miscellaneous Petition is closed.