The Supreme Court clarified that in view of the language employed in Entry 57 of List II of Seventh Schedule of the Constitution of India, no authority is authorized to levy or collect tax on vehicles which are not suitable for use on roads and have been designed for off-road use in factory or enclosed premises. The Court thus held that the construction equipment vehicles meant for use within defined enclosed premises and not on public roads, are excluded from the definition of “motor vehicle” under Section 2(28) of the Motor Vehicles Tax Act, 1958.
The Court emphasised thar the vehicles of the kind used by the appellant which are special vehicles i.e., construction equipment vehicles may be suitable for plying upon roads are essentially meant to be used in a factory or an enclosed premises and as such are not chargeable to tax under the Gujarat Tax Act.
The ruling came after considering the distinction between normal motor vehicles and the motor vehicles of special kind such as heavy construction equipment or special type of vehicles which are meant to be used within a specified area and not on public roads.
A Two-Judge Bench of Justice Pankaj Mithal and Justice Prasanna B. Varale observed that under Article 265 of the Constitution, no tax can be levied without the authority of law. It read this with Entry 57 of List II of the Seventh Schedule, which grants States the power to levy taxes on “vehicles suitable for use on roads”, and held that this power is restricted to vehicles that are suitable for use on roads.
The Bench scrutinized the definition of ‘motor vehicle’ under Section 2(28) of the 1958 Act, and found that while the appellant’s vehicle might fall under the inclusive part i.e., “any mechanically propelled vehicle adapted for the use upon roads”, they are expressly excluded by the exclusive part, i.e., “but does not include a vehicle of a special type adapted for use only in a factory or in any other enclosed premises”.
The evidence showed they are special vehicles adapted for use only within an enclosed premises, and they are transported on trailers and are not meant to ply on roads. Therefore, they stand excluded from the definition of a motor vehicle, added the Bench.
The Bench also referred to Rule 2(cab) of the Central Motor Vehicle Rules, 1989, which defines “construction equipment vehicle” as a special category designed for off-highway operations. This reinforced the view that the appellant’s vehicles are of a special type and not simplicitor motor vehicles.
Lastly, the Bench considered the Ministry of Road Transport and Highways (MoRTH) circular dated 13.07.2020, which clarified that such special type vehicles, if not run on roads, do not qualify as motor vehicles requiring registration. The Bench explained that while the circular cannot override the statute, it is binding on departmental authorities.
Accordingly, the Bench rejected the proposition that all vehicles kept for use in a State are taxable, irrespective of their nature or place of use. It warned that such a broad interpretation would lead to an anomaly where even aircraft or army tanks, which are capable of using roads, could be classified as motor vehicles and taxed, which could not have been the legislative intent.
Briefly, the appellant, a public limited company engaged in the manufacturing of clinker and cement, utilizes various Heavy Earth Moving Machinery, predominantly Dumpers, Loaders, Excavators, and Surface Miners, in connection with its manufacturing work at its cement plants in Gujarat. The vehicles in question were not intended for “on-road” use. They were transported to the appellant’s work premises in a dismantled condition on trailers and were exclusively used within the factory or enclosed premises.
The appellant provided certificates from the manufacturers (M/s Bharat Earth Movers Limited and M/s Hindustan Motors Limited) and the Automotive Research Association of India, all confirming that these vehicles were designed for off-road operations and were not issued road-worthiness certificates. The dispute arose when the Transport Commissioner, through a press advertisement, directed the registration of all special service vehicles, including Dumpers, and demanded payment of road tax.
The Regional Transport Officer subsequently issued a show-cause notice demanding Rs. 59.39 lakhs towards tax, interest, and penalty. The appellant, however, under protest, deposited Rs. 88.45 lakhs. When the appellant challenged the show-cause notice before the High Court, the same was dismissed, holding that the vehicles were “motor vehicles” and were chargeable to tax.
Appearances:
Senior Advocates P. Chidambaram and Nakul Dewan, Sr. Adv., AOR E. C. Agrawala, along with Advocates Mahesh Agarwal, Ankur Saigal, Rohan Talwar, Himanshu Saraswat, Uday Aditya Jetley Pocha, Naman Agarwal, Adya Joshi, Satyender Saharan, Rohan Andrew Naik, Ishika Garg, and Sathvik Chandrashekar, for the Appellant
Senior Advocate K. Parameshwar, AOR Deepanwita Priyanka, along with Advocates Prasad Hegde, Veda Singh, and Priyal Sheth, for the Respondent
