Manisha Yadav
On 29 August 2025, the Supreme Court upheld an order to refund taxes paid under protest. The Supreme Court stated that if a motor vehicle is not used or kept for use in a public place, the owner should not pay motor vehicle tax during that time.
This case was brought to the Supreme Court from a decision by the Andhra Pradesh High Court, relating to Section 3 of the Andhra Pradesh Motor Vehicle Taxation Act, 1963.
The judges, Justice Manoj Misra and Justice Ujjal Bhuyan, explained that motor vehicle tax is meant to be compensation for the use of public infrastructure like roads. They emphasised that if a vehicle is not used in a public area, the owner is not benefiting from public infrastructure and should not pay the tax for that period.
Factual Background
The Appellant Company owned heavy lifting equipment and provided logistics at the Visakhapatnam Steel Plant, which is part of Rashtriya Ispat Nigam Limited (RINL). The company informed the Transport Department that its vehicles were only used in the central dispatch yard and not on public roads. They requested an exemption from the motor vehicle tax for the time the vehicles were used within the plant’s premises, following Section 3 of the Andhra Pradesh Motor Vehicle Taxation Act of 1963.
After inspection, the Motor Vehicle Inspector demanded Rs 7,37,960 from the company for the vehicles. A further demand of Rs 15,33,740 was also issued. The company paid a total of Rs 22,71,700. The High Court instructed the authorities to consider the company’s request for a tax exemption. However, when the authorities denied this request, a Single Judge of the High Court ordered a refund of Rs 22,71,700. This ruling was later overturned by a Division Bench, leading to the appeal to the Supreme Court.
Reasoning
The Supreme Court explained that tax applies when a vehicle is used or ready to be used in a public place. If a vehicle is actually operated in a public area or is intended for such use, then the tax must be paid.
The judges noted that Rule 12A of the Andhra Pradesh Motor Vehicles Taxation Rules, 1963, exists to support Section 3. They emphasised that rules cannot go beyond the limits set by the main law. They stated that when the Company’s vehicles were only used in the closed area of RINL, they did not qualify as being used or intended for use in a public place.
The judges concluded that the main issue was understanding Section 3. They added that Rule 12A should work in line with Section 3. Therefore, the phrase “kept for use” should be interpreted as “kept for use in a public place.”
In this case, the Appellant’s vehicles were only used within RINL’s restricted area, which does not count as a public place. Thus, the vehicles should not be taxed for the time they were confined to that area. The judges dismissed the argument from the respondents that the appellant had not reported the non-use of the vehicles, stating that even without that report, the vehicles were not subject to tax for the period they were within RINL.
Given these points, the Bench overturned the decision of the Division Bench of the High Court and allowed the appeal.
Case Name: Tarachand Logistic Solutions Limited v. State of Andhra Pradesh
Case Number: 2025 INSC 1052
Bench: Justice Manoj Misra and Justice Ujjal Bhuyan
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