The Supreme Court has ruled that Heavy Earth Moving Machinery and construction equipment vehicles, such as Dumpers, Loaders, and Excavators, which are used exclusively within enclosed factory premises, do not fall within the ambit of “motor vehicles” for the purpose of taxation. The Bench of Justice Pankaj Mithal and Justice Prasanna B. Varale set aside the judgment of the Gujarat High Court, holding that such vehicles are “off-road equipments” and are not liable to road tax under the Gujarat Motor Vehicles Tax Act, 1958.
The central legal issue before the Apex Court was whether special service vehicles or construction equipment vehicles—specifically Dumpers, Loaders, Excavators, Surface Miners, Dozers, Drills, and Rock Breakers—are “motor vehicles” under Section 2(28) of the Motor Vehicles Act, 1988, and consequently liable to be taxed under the Gujarat Motor Vehicles Tax Act, 1958.
The Supreme Court allowed the appeals filed by Ultratech Cement Ltd., holding that these vehicles, being “special type of vehicles” adapted for use only in a factory or enclosed premises, stand excluded from the definition of a motor vehicle. Consequently, the Court held they are not chargeable to tax.
Background
The appellant, Ultratech Cement Ltd., utilizes various heavy earth-moving machinery and construction equipment at its Gujarat Cement Works and Narmada Cement Works plants. These vehicles, including Dumpers and Loaders, are transported to the appellant’s premises in a dismantled condition on trailers and are used for manufacturing work within the factory premises.
Initially, in 1996, the Regional Transport Officer (RTO), Bhuj, acknowledged that Dumpers used within private premises did not require registration. However, in November 1999, the Transport Commissioner directed the registration of all special service vehicles and demanded payment of road tax. Following an inspection in January 2000, the authorities insisted on registration and tax payment.
The appellant protested, citing certificates from manufacturers like Bharat Earth Movers Limited and Hindustan Motors Limited, as well as the Automotive Research Association of India, which certified that these vehicles were designed for off-road mining and industrial operations and were not meant for on-road use. Despite this, the RTO issued a show-cause notice in 2006 demanding Rs. 59,39,401 towards tax, penalty, and interest. The appellant eventually paid Rs. 88.45 lakhs under protest and challenged the demand before the Gujarat High Court.
The High Court dismissed the petition on July 15, 2011, holding that the vehicles were “motor vehicles” and chargeable to tax. The appellant then approached the Supreme Court.
Arguments of the Parties
Senior Advocate P. Chidambaram, appearing for the appellant, argued that Entry 57 of List II of the Seventh Schedule of the Constitution permits taxation only of vehicles “suitable for use on roads.” He contended that vehicles not used in public places or suitable for roads are outside the purview of the definition of “motor vehicles.” The appellant relied on the Ministry of Road Transport and Highways (MoRTH) circular dated July 13, 2020, which termed such vehicles as “off-road equipment.” Reliance was placed on the Supreme Court’s decision in Bolani Ores Ltd. vs. State of Orissa, which held that “adapted for use upon roads” means suitable for plying on roads.
Conversely, Senior Advocate K. Parameshwar, appearing for the State of Gujarat, submitted that Section 3(1) of the Gujarat Tax Act is the charging provision which levies tax on “all motor vehicles used or kept for use in the State.” He argued that no distinction could be made based on whether the vehicle is used on-road or off-road, as the statute does not use the words “public place” or “public road.” The State contended that the MoRTH circular could not override express statutory provisions.
Court’s Analysis
The Supreme Court began by analyzing Article 265 and Entry 57 of List II of the Seventh Schedule of the Constitution. The Bench observed that the State is competent to levy tax only on vehicles “suitable for use on roads.”
Regarding the Gujarat Tax Act, the Court noted:
“It is on account of the conspicuous absence of the qualification ‘suitable for use on roads’ in the Gujarat Tax Act that the vehicles used by the appellants which are said to be off-road vehicles are sought to be taxed. The Gujarat Tax Act cannot travel beyond Entry 57 of List II of Seventh Schedule of the Constitution of India so as to tax vehicles which are not suitable for being used on roads.”
The Court then examined Section 2(28) of the Motor Vehicles Act, 1988, which defines a “motor vehicle.” The Bench noted that the definition has two parts: an inclusive part and an exclusive part. The second part explicitly excludes “a vehicle of a special type adapted for use only in a factory or in any other enclosed premises.”
Applying this to the facts, the Court observed:
“The vehicles in question used by the appellant are all in the nature of special vehicles as they are basically construction equipment vehicles which have been made suitable for use only in a factory and an enclosed premises rather than for use on roads… They are all off-road vehicles that do not ordinarily ply on roads.”
The Court further referred to the definition of “construction equipment vehicle” in Rule 2(cab) of the Central Motor Vehicle Rules, 1989, and noted that Schedule I of the Gujarat Tax Act does not prescribe any rate of tax for such vehicles.
Referring to the precedent in Bolani Ores Ltd., the Court reiterated that if a vehicle does not use public roads, it cannot be taxed. The Court distinguished the judgments in Natwar Parikh & Co. Ltd. and Western Coalfields Limited, noting that those cases did not specifically consider the exclusion clause in the second part of Section 2(28).
The Court reasoned that accepting the State’s argument would lead to anomalies, observing:
“It may be noted that aircrafts specially those belonging to Air Force are capable of landing on the highways… Similar would be the case with the tanks belonging to Army… This cannot be the intention of the legislature in prescribing the definition of the motor vehicles under the Act and to impose tax thereupon.”
Decision The Supreme Court allowed the appeals and set aside the impugned judgments of the Gujarat High Court. The Court concluded:
“We are of the conclusive opinion that the vehicles used by the appellants are vehicles of special types, precisely construction equipment vehicles which are suitable and are meant for use for operation and use within the industrial area/factory premises/ defined enclosed premises and are not meant for use on roads or public roads. They are off-road equipments and as such stand excluded not only from the purview of the ‘motor vehicle’ as defined under Section 2 (28) of the Act but also from tax…”
However, the Court added a caveat that if such vehicles are found using roads, they would be subject to the rigors of the Act, including seizure and penalty.
Case Details:
- Case Title: Ultratech Cement Ltd. vs. The State of Gujarat & Ors.
- Case No: Civil Appeal Nos. 3352-3353 of 2017 (with connected matters)
- Coram: Justice Pankaj Mithal and Justice Prasanna B. Varale
