No Motor Vehicle Tax On Vehicle Rendered Unroadworthy After Accident, Even If Owner Failed To Intimate Authorities: Kerala High Court

Justice Ziyad Rahman A.A., was delivering the judgment in a writ petition filed by a carriage owner whose vehicle became unfit to use in road pursuant to a road accident.

The brief facts of the case is that the vehicle of the petitioner was involved in an accident with a KSRTC bus on September 16, 2017 and suffered damage so severe that it became completely unfit for road use.

Despite the accident, the authorities subsequently demanded ₹10,93,150 towards motor vehicle tax arrears from April 1, 2018 onwards. Revenue recovery proceedings were also initiated in April 2025.

The petitioner claimed that immediately after the accident, he had submitted a representation before the Regional Transport Officer, Thrissur, about the accident and also requesting for exemption from the tax.

The State contended that the petitioner had not established that his representations seeking exemption had been received by the RTO. It was also argued that the petitioner had failed to comply with the requirement of submitting the prescribed 'G Form' in advance.

The Court, noted that the FIR prima facie indicated that the vehicle had suffered serious damage and that the vehicle appeared to be in an abandoned condition.

The Court went on to examine the liability to pay the tax under the Kerala Motor Taxation Act and noted that Section 3(1) of the Act contemplates that tax shall be levied on every motor vehicle used or kept for use in the State.

The Court thus observed that in cases where it is possible for the registered owner of the vehicle to demonstrate that, the vehicle was completely unfit and beyond repair for using it on the road as on the date, consequent to an accident or for any other reasons, there cannot be any tax liability upon the said vehicle.

It also took note of the fact that the tax demand for the period beginning in 2018 was raised only in April 2025. This delay, the Court said, contributed to the accumulation of the substantial arrears and deprived the owner of an earlier opportunity to address the alleged liability.

While acknowledging that every registered owner has a statutory obligation to ensure timely payment of motor vehicle tax, the Court held that this obligation cannot be applied mechanically to a vehicle which, on evidence, was no longer capable of being used or kept for use.

The State had also submitted that Rule 10 of the Kerala Motor Vehicle Taxation Rules, which contemplates advance intimation of non-use through 'G Form', deals with exemption from payment of tax for a temporary period.

The Court added that this provision cannot be treated as creating a tax liability where the vehicle had become permanently unfit for use.

“Considering the fact that, the liability to pay tax is on the use of the vehicle or for keeping the vehicle for use, the only conclusion possible is that, no tax liability could be imposed, in such cases where, the registered owner convincingly establishes before the authorities that, the vehicle was indeed not used or kept for use. The condition of the vehicle, in respect of which the tax becomes payable, is a fact which can be verified by the authorities concerned and in case the registered owner is able to demonstrate with proper documents and materials that, the vehicle sustained serious damage making it not roadworthy beyond repair, the tax need not be collected in respect of the period during which, the vehicle was remaining as not roadworthy.” Court observed.

It was further observed that Rule 10 prescribed for submission of an intimation of non-use, which is an exemption from payment of tax for a temporary period, which is distinct from a situation where the vehicle has become unfit permanently due to serious damage.

The Court was conscious that a registered owner has a statutory obligation to intimate the authorities about the unfit condition of a vehicle. However, it held that failure to comply with that procedural requirement cannot automatically result in tax being imposed on a vehicle which was otherwise not taxable because it was incapable of being used.

The Court further noted that the nature of persons commonly affected by the stipulations are generally ordinary people who operate the vehicle on their own, for earning their livelihood and their priorities when a vehicle meets with an accident resulting in irretrievable damage is to ensure the source of livelihood is secured without any break and not the timely intimation of the condition of vehicle is given to the authorities.

“While enforcing the law on the principles that, ignorance of law cannot be an excuse. Although, such persons cannot be granted exemptions as such, at least an opportunity can be granted to them to prove that, the vehicle was not being used or kept for use during the relevant period. If such persons are able to establish by producing evidence to show that, the vehicle was not being used or kept for use, due to its lack of road worthiness owing the damages beyond repair, and that the vehicle itself is dismantled, they should be exonerated from payment of tax, since no taxable event occurred.” Court added.

The court thus observed that the authorities must instead examine the evidence and determine whether the vehicle was actually roadworthy during the relevant period.

The Court further held that mechanically imposing tax merely because 'G Forms' were not submitted or dismantling of the vehicle was not intimated would allow a procedural irregularity to defeat substantive justice.

The Court stressed that where documents and other materials demonstrate that a vehicle sustained serious damage and remained beyond repair, the authorities are required to consider that material rather than mechanically impose tax merely because the prescribed intimation was not submitted.

The Court has also relied on the Supreme Court's decision in Tarachand Logistic Solutions Limited v. State of Andhra Pradesh, [2025 SCC OnLine SC 1851] where it was observed that motor vehicle tax is compensatory in nature and has a direct nexus with the end use of the vehicle. A person using public infrastructure such as roads and highways is required to pay for such use; where a motor vehicle is neither used nor kept for use in a public place, the rationale for imposing motor vehicle tax does not arise.

The High Court thus held that where a vehicle could not have been used or kept for use during the relevant assessment period and there is clear evidence of its lack of roadworthiness, the taxable event does not occur and no tax liability can be imposed.

The Court quashed the demand and revenue recovery notices and directed the petitioner to submit a fresh representation to the RTO along with the FIR, police final report and other materials establishing that the vehicle had remained in a completely dilapidated condition since the accident.

The competent authority was directed to conduct an inquiry, including physical inspection of the vehicle if necessary, and take a decision within two months. If the authority finds that the vehicle had become unroadworthy and could not be used, the petitioner would be entitled to relief from tax from the date on which the vehicle became unroadworthy. Until that decision, coercive recovery proceedings were ordered to remain in abeyance, subject to the petitioner submitting the representation within three weeks.

Case Title: Cleetus E.P v State of Kerala and Ors.

Case No: WP(C) 24420/ 2025

Citation: 2026 LiveLaw (Ker) 440

Counsel for Petitioner: Lindons C. Davis, E.U. Dhanya, Chinju P. Joyies, Vinayak Manoharan P

Counsel for Respondent: Sindhu Santhalingam (GP)