Finance company taking possession of vehicle for non payment is liable to pay road tax

Financier taking possession of transport vehicle for non payment of loan is liable to pay road tax from the date of taking possession of the said vehicle 

In a recent judgment, the Hon’ble Allahabad High Court has held that a financier in possession of transport vehicle is liable to pay road tax from the date of taking possession of the said vehicle 

ABCAUS Case Law Citation:
ABCAUS 4058 (2024) (05) HC

In the instant case, the Grievance of the petitioner was that though he was original registered owner of a vehicle (Jeep Taxi) which had been financed from a Finance company. However, owing to default committed by the petitioner in repayment of its loan, the said finance company had forcibly repossessed/taken away the vehicle.

The Petitioner contended that under the given facts, he was not liable for road tax dues of the said vehicle since its repossession.

The Division Bench of the Hon’ble Allahabad High Court observed that a Full Bench of the Court had held that a financier-in-possession of the transport vehicle is liable to pay tax under the U.P. Motor Vehicles Taxation Act. Against the said decision, the financier had extended a loan for the purchase of the transport vehicle and on default in payment of the loan it was in possession of the vehicle. Against the order of the full bench, the financier had preferred an appeal before the Hon’ble Supreme Court.

The Hon’ble Supreme Court 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 the said vehicle under the said agreement.

The Hon’ble High Court observed that till date the Transport Authorities had not approached the finance company.

The Hon’ble High Court directed that in case the petitioner files a fresh application on the prescribed proforma before Road Tax Authorities referable to Rule 18 of the U.P. Motor Vehicles Taxation Rules, 1998, within a period of two weeks along with a certified copy of this order, that application shall be dealt with strictly in accordance with law, till date no coercive measure may be adopted against the petitioner.

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