Last Updated:September 05, 2025, 03:13 IST

The court pointed out that the motor vehicle tax is compensatory in nature, meant to cover the use of public infrastructure

Considering the appeal, the SC noted the ‘public place’ as defined under the Motor Vehicles Act, 1988, means a road, street, way, or other place, whether a thoroughfare or not, to which the public have a right of access, and includes any place or stand at which passengers are picked up or set down by a stage carriage. Representational image

The Supreme Court on August 29 held that if a motor vehicle is not used in a “public place” or not kept for use in one, then the person concerned is not deriving benefit from the public infrastructure and should not be burdened with the motor vehicle tax for such period.

A bench of Justices Manoj Misra and Ujjal Bhuyan pointed out that the motor vehicle tax is compensatory in nature, which has a direct nexus with the end use.

“The rationale for levy of motor vehicle tax is that a person who is using public infrastructure, such as, roads, highways etc, has to pay for such usage. Legislature has consciously used the expression ‘public place’ in Section 3 of the Andhra Pradesh Motor Vehicle Taxation Act, 1963,” the SC said.

The bench said that Section 3 is the charging provision, which authorises the state government to impose a tax on motor vehicles.

“The taxable event under Section 3 is when a vehicle is used or kept for use in a ‘public place’ in the State. Therefore, the tax is on the user or intendment for use of motor vehicle in a ‘public place’. Thus, if a vehicle is actually used in a ‘public place’ or kept in such a way that it is intended to be used in a ‘public place’ then the tax liability accrues,” the bench said.

Allowing the appeal by M/s Tarachand Logistic Solutions Ltd, the court set aside the judgment and order of December 19, 2024, passed by the Andhra Pradesh High Court’s division bench and restored the judgment and order of the single judge on June 13, 2023.

The appellant, engaged in the business of providing logistical support since 1985, deployed 36 motor vehicles in terms of contract for handling and storing iron and steel materials at the central dispatch yard within Visakhapatnam Steel Plant, Andhra Pradesh, a corporate entity of Rashtriya Ispat Nigam Limited.

Since April 1, 2021, all the motor vehicles stopped plying on the public roads, as they were confined to the central dispatch yard premises only. The appellant requested an exemption from payment of the motor vehicle tax for the period the vehicles were confined and used within the central dispatch yard premises, in terms of Section 3 of the Andhra Pradesh Motor Vehicle Taxation Act, 1963.

The authorities, instead, raised a demand of Rs 22,71,700.00 as motor vehicle tax, which was paid by the appellant under protest. The latter demanded a refund, which was not responded to.

Subsequently, on a direction by the High Court, the authorities considered the appellant’s prayer and rejected it.

On a writ petition, the single judge held that the appellant was plying its vehicles within the central dispatch yard, which is not a “public place” and directed the respondents to refund the amount of Rs 22,71,700.00. The division bench, however, set aside this judgment.

Considering the appeal, the bench noted the “public place” as defined under the Motor Vehicles Act, 1988, means a road, street, way, or other place, whether a thoroughfare or not, to which the public have a right of access, and includes any place or stand at which passengers are picked up or set down by a stage carriage.

Referring to Rule 12A of the Andhra Pradesh Motor Vehicles Taxation Rules, 1963, the court said its mandate is that if the registered owner, etc, intimates the licensing officer that he is not going to operate the motor vehicle after expiry of the period for which he has paid the motor vehicle tax, he would not be required to pay the motor vehicle tax thereafter.

The court pointed out that Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law.

“Levy of tax has to be explicit. There cannot be exaction of tax by implication or by following an interpretative process,” it said.

The bench emphasised that it is trite law that the charging section is the core of a taxing statute. Generally speaking, a taxing statute has to be construed literally; this is more so in the case of a charging section.

The top court said Rule 12A has to be interpreted in such a way so as to be in sync with Section 3. It held that the motor vehicles in question were used or kept for use only within the restricted premises of RINL, which is not a “public place”. Therefore, the vehicles are not liable to be taxed for the period they were used or kept for use within the restricted premises of RINL.

Even in the absence of any intimation in terms of Rule 12A, the motor vehicles of the appellant cannot be subjected to motor vehicle tax for the period those were used or kept confined within the restricted premises of RINL, the SC declared.

Sanya Talwar

Sanya Talwar, Editor at Lawbeat, has been heading the organisation since its inception. After practising in courts for over four years, she discovered her affinity for legal journalism. She has worked previousl…Read More

Sanya Talwar, Editor at Lawbeat, has been heading the organisation since its inception. After practising in courts for over four years, she discovered her affinity for legal journalism. She has worked previousl… Read More

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