SUPREME COURT RULES EXCAVATORS, DUMPERS & SIMILAR VEHICLES USED EXCLUSIVELY INSIDE FACTORIES NOT LIABLE FOR ROAD TAX UNDER MOTOR VEHICLES ACT:

The Supreme Court has ruled that Heavy Earth Moving Machinery (HEMM) and construction equipment, such as excavators, dumpers, loaders, dozers, surface miners, and rock breakers, when used exclusively within factory premises or other defined enclosed industrial areas, do not qualify as "motor vehicles" under Section 2(28) of the Motor Vehicles Act, 1988. Consequently, they are not liable to pay road tax.

A bench comprising Justices Pankaj Mithal and Prasanna B Varale allowed the appeal filed by Ultratech Cement Ltd., setting aside a 2011 judgment of the Gujarat High Court that had upheld the state's demand for road tax on such machinery. The court concluded that these vehicles are of a special type, specifically construction equipment vehicles designed and suitable for operation solely within industrial areas, factory premises, or enclosed spaces. They are not intended or meant for use on public roads and qualify as off-road equipment.

The bench further held that such machinery stands excluded not only from the definition of "motor vehicle" under Section 2(28) of the Act but also from taxation. Entry 57 of List II (State List) in the Seventh Schedule of the Constitution authorizes states to levy tax only on vehicles suitable for use on roads. Moreover, Schedule I to Section 3(1) of the Gujarat Motor Vehicles Tax Act, 1958, does not prescribe any tax for construction equipment vehicles of this nature.

The dispute originated when the Gujarat Transport Department, based on a 1999 press advertisement, required Ultratech Cement to register its dumpers, loaders, excavators, surface miners, and rock breakers deployed at its cement plants in Kutch and Rajkot, as motor vehicles and pay road tax under the Gujarat Motor Vehicles Tax Act, 1958. The demand, including interest and penalty, amounted to approximately Rs.1.36 crores for periods starting from 1999. Ultratech challenged this, asserting that the machinery was never operated on public roads; it was transported to the sites in knocked-down condition on trailers and used only within enclosed plant premises.

The company supported its case with certificates from manufacturers, including Bharat Earth Movers Ltd., and the Automotive Research Association of India, confirming these as off-road equipment for which no road-worthiness certificate is issued. Despite this, the Gujarat High Court in 2011 rejected Ultratech's plea, holding the machinery fell within the definition of motor vehicles and was taxable.

In its judgment, authored by Justice Mithal, the Supreme Court categorized these HEMMs as special type vehicles tailored for off-road industrial use, fitting squarely within the exclusionary clause of the motor vehicle definition. The bench referenced its recent decision in Tarachand Logistic Solutions Limited vs. State of Andhra Pradesh & Ors. (2025 LiveLaw (SC) 852), observing that if a vehicle is not used or kept for use in a public place and the owner derives no benefit from public infrastructure, it should not be burdened with motor vehicle tax.

The Supreme Court allowed the appeal, quashed the tax demand, and set aside the High Court's order. However, it added a clear caveat: if any such vehicles are found using public roads, they would not be exempt from the provisions of Section 2(28) of the Motor Vehicles Act, Section 3 of the Gujarat Tax Act, and could face proceedings for seizure and penalty as per law. This ruling provides significant relief to industries in sectors like cement, mining, and construction, where heavy off-road machinery is commonly deployed within enclosed premises, clarifying that taxation applies only to vehicles intended for public road use.