Excavators, similar earthmoving machines used in factories not liable for road tax: SC

New Delhi: In a major ruling, the Supreme Court of India has held that Heavy Earth Moving Machinery (HEMM) and construction equipment such as excavators, dumpers, loaders and dozers, when used solely within factory premises or enclosed areas, do not qualify as “motor vehicles” under Section 2(28) of the Motor Vehicles Act and are therefore not subject to road tax.

Allowing the appeal filed by Ultratech Cement Ltd., a bench comprising Justices Pankaj Mithal and Prasanna B Varale overturned the Gujarat High Court’s ruling, which had earlier upheld the state government’s demand for road tax amounting to crores on such machinery, despite it being used entirely within Ultratech’s enclosed plant premises.

The Court observed that the vehicles in question are special-purpose construction equipment designed specifically for operation within industrial areas, factory premises or other defined enclosed spaces. It noted that these machines are not intended for use on public roads and are essentially off-road equipment. As such, they fall outside the definition of “motor vehicle” under Section 2(28) of the Act. The Court further held that Entry 57 of List II of the Seventh Schedule to the Constitution permits taxation only of vehicles suitable for use on roads. It also pointed out that Schedule I to Section 3(1) of the Gujarat Motor Vehicles Tax Act does not prescribe any tax for construction equipment vehicles, making them not chargeable to road tax.

The dispute began when the Gujarat Transport Department, relying on a 1999 press advertisement, directed Ultratech Cement to register its dumpers, loaders, excavators, surface miners and rock breakers—used within its cement plants in Kutch and Rajkot—as motor vehicles and pay road tax under the Gujarat Motor Vehicles Tax Act, 1958. The total demand, including interest and penalties, was approximately ₹1.36 crore for periods starting from 1999.

Ultratech challenged the demand, stating that the machinery was never operated on public roads. According to the company, the equipment was transported in dismantled condition on trailers to the plant locations and was used exclusively within enclosed industrial premises. Ultratech also produced certificates from manufacturers such as Bharat Earth Movers Ltd. and the Automotive Research Association of India, confirming that the machines were off-road equipment and did not even require road-worthiness certification.

In 2011, the Gujarat High Court dismissed Ultratech’s challenge, holding that the machinery fell within the definition of “motor vehicles” and was therefore taxable. Ultratech subsequently appealed to the Supreme Court. Setting aside the impugned order, Justice Mithal, who authored the judgment, classified HEMMs as “special type vehicles” meant for off-road industrial use and clearly covered by the exclusion contained in the definition of “motor vehicle.”

The Supreme Court also relied on its recent ruling in Tarachand Logistic Solutions Limited vs State of Andhra Pradesh & Ors., 2025 LiveLaw (SC) 852, reiterating that if a vehicle is neither used nor kept for use in a public place, and the owner derives no benefit from public infrastructure, imposing motor vehicle tax would be unjustified.

Consequently, the appeal was allowed, and the road tax demand was quashed. However, the Court clarified that if such vehicles are found to be used on public roads, they would not be exempt from the application of Section 2(28) of the Motor Vehicles Act and Section 3 of the Gujarat Tax Act, and could also be subjected to seizure and penalties in accordance with law.
(With Live Law inputs)