Supreme Court Rule says, ‘No Road, No Tax’: Vehicles Confined to Private Premises Exempt from Motor Vehicle Levy

The Supreme Court has ruled that motor vehicles which are not used on public roads or kept for use in a public place cannot be subjected to motor vehicle tax. The court explained that the tax is compensatory in nature and is directly linked to the use of public infrastructure such as roads and highways. If a person is not using that infrastructure, they should not be burdened with the levy.

The ruling came on an appeal filed by M/s Tarachand Logistic Solutions Ltd, a company engaged in providing logistics support since 1985. The company had deployed 36 motor vehicles for handling and storage of iron and steel materials within the central dispatch yard of the Visakhapatnam Steel Plant, a corporate entity of Rashtriya Ispat Nigam Limited. From April 2021 onwards, these vehicles stopped operating on public roads and were confined to the private yard premises of the plant. Despite the vehicles being restricted to the premises and not plying on any public road, state authorities raised a demand for motor vehicle tax amounting to more than twenty two lakh rupees.

The company paid this amount under protest and applied for a refund, claiming that under Section 3 of the Andhra Pradesh Motor Vehicle Taxation Act, 1963, tax could only be levied when vehicles were used or intended to be used in a public place. When no response was received, it approached the Andhra Pradesh High Court. A single judge accepted the company’s claim and directed that the tax amount of Rs 22,71,700 be refunded. However, the state filed an appeal before a division bench of the High Court, which on December 19, 2024, set aside the single judge’s order and dismissed the company’s plea.

The company then appealed to the Supreme Court. Hearing the matter, a bench of Justices Manoj Misra and Ujjal Bhuyan emphasized that motor vehicle tax is not a compulsory exaction without justification but a compensatory levy with a direct nexus to use of public roads and related infrastructure. The bench observed that the legislature had consciously used the expression “public place” in Section 3 of the Motor Vehicle Taxation Act, and that the charging provision must be read literally. The taxable event is the use or intended use of a motor vehicle in a public place, and if the vehicle is not used or kept for such use, no tax liability can accrue.

The court also referred to the definition of public place in the Motor Vehicles Act, 1988, which means a road, street, way, or other place to which the public has a right of access, including stands for picking up or setting down passengers. By this definition, the dispatch yard of the Visakhapatnam Steel Plant, which is a restricted private premises not accessible to the general public, could not qualify as a public place. Therefore, vehicles restricted within this yard were outside the scope of motor vehicle taxation.

The bench also examined Rule 12A of the Andhra Pradesh Motor Vehicle Taxation Rules, which states that if a registered owner informs the licensing officer that a vehicle will not be operated after the expiry of the paid tax period, then no further tax shall be payable. While the authorities had argued that the company had not given such intimation, the Supreme Court held that even without a formal notice, if the vehicles were clearly not used or kept for use in a public place, tax could not be levied. The judges stressed that the mandate of Rule 12A must be interpreted harmoniously with Section 3 of the parent Act.

Importantly, the court invoked Article 265 of the Constitution, which mandates that no tax can be levied or collected except by authority of law. The bench reiterated that taxation statutes must be strictly construed and the charging section is the core of any tax law. Unless the statute clearly authorizes the levy, no amount can be collected. Exaction of tax by implication or interpretation is impermissible.

Applying these principles, the court concluded that since the vehicles of M/s Tarachand Logistic Solutions were confined within the restricted premises of the Visakhapatnam Steel Plant and not used or intended for use on public roads, they were not liable to motor vehicle tax for the relevant period. The bench therefore set aside the division bench judgment of the Andhra Pradesh High Court and restored the single judge’s order directing refund of the amount paid.

The decision clarifies the scope of motor vehicle taxation in India by reinforcing that the levy is tied to actual or intended use of public infrastructure. It also underlines the constitutional principle that tax can be collected only with clear legislative authority and not through implication.

Case Title: M/s Tarachand Logistic Solutions Ltd vs State of Andhra Pradesh and Others

Judgment Date: August 29, 2025

Bench: Justices Manoj Misra and Ujjal Bhuyan