Auction purchasers are liable for arrear motor vehicle tax, subject to off-road exemption.

Santosini Mohanty purchased an Ashok Leyland trailer under a hire-purchase agreement with State Bank of India but defaulted on the loan.

The Bank repossessed and auctioned the vehicle; the petitioner became the successful bidder and paid the auction price and GST.

When he sought transfer of ownership, the RTO demanded ₹1,08,000 in tax and ₹1,98,000 in penalty, said to be outstanding against the vehicle.

The petitioner disputed liability for amounts relating to the period before he acquired possession and sought a change of ownership with the dues waived.

The vehicle remained registered in the previous owner’s name

1. Whether an auction purchaser may be required to pay tax arrears and penalty accrued while the previous owner possessed the vehicle

2. Whether the petitioner could obtain relief from the tax and penalty demand, including for a period when the vehicle was allegedly off-road, without first applying to the RTO

3. Whether the ownership change was to be pursued under Section 51(5) of the Motor Vehicles Act, 1988

Section 51(5) of the Motor Vehicles Act, 1988 provides a procedure for the registering authority to cancel and issue a fresh registration certificate where the person entitled under a hire-purchase agreement has taken possession following the registered owner’s default, subject to the statutory conditions

Sections 12 and 13 of the Orissa Motor Vehicles Taxation Act, 1975 govern liability for unpaid tax and penalty: Section 12 permits recovery from the transferee or a person in possession or control, without extinguishing the transferor’s liability; Section 13 makes the registered owner or person in possession or control liable for penalty, subject to a reasonable opportunity of hearing

In Orissa State Financial Corporation v. Transport Commissioner-cum-Chairman, STA, (2005) 11 SCC 440, the Supreme Court held that statutory liability for arrears is not displaced by private arrangements and that recovery may be pursued against the previous owner, purchaser, or person in possession, as applicable

Sri Rabindra Kumar Jena v. Managing Director, OSFC, 93 (2002) CLT 670, similarly recognized a purchaser’s statutory obligation to pay arrears

Under Rajkishore Rout v. R.T.O.-cum-Taxing Authority, Balasore, 1992 (I) OLR 63, tax liability depends on use or keeping the vehicle for use, and an off-road claim may be relevant where the vehicle was not used and the circumstances explain the absence of prescribed intimation

The Court held that an auction purchaser may be liable for arrear tax even for the period when the previous owner possessed the vehicle, consistently with Section 12 and the cited authorities

However, the petitioner’s claim that the vehicle was off-road raised a separate question bearing on tax liability.

The Bank reportedly emailed the RTO on 1 September 2026 about the vehicle’s off-road status, but the petitioner had not applied to the RTO for a decision on exemption from tax or penalty for that period

The Court therefore left that issue, and the ownership-transfer process under Section 51(5), for the competent authority to determine in accordance with law.

It disposed of the writ petition, granting the petitioner liberty to apply to the RTO or appropriate authority within seven days.

The authority was directed to decide the application—including the ownership change under Section 51(5) and tax and penalty liability under Sections 12 and 13—within 30 days of receiving the application and a copy of the order, and to communicate its decision within a further seven days