Can Road Tax Be Levied on Excavators and Dumpers Used Exclusively Within Factory Premises?

The levy of motor vehicle tax is traditionally justified on the principle that vehicles using public roads must contribute to their maintenance and regulation. However, modern industrial operations frequently deploy heavy earth-moving machinery such as excavators, dumpers, loaders, dozers, and surface miners that are confined strictly to factory premises, mining areas, or other enclosed industrial zones. These machines are often incapable of normal road use, transported in dismantled condition, and never derive any benefit from public road infrastructure.

This raises a crucial legal question: Can States levy road tax on excavators and dumpers that are used exclusively within a factory or enclosed premises and never ply on public roads?

This issue has now been conclusively settled by the Supreme Court of India in Ultratech Cement Ltd. v. State of Gujarat & Ors. (2026 INSC 43), which provides authoritative clarity on the constitutional, statutory, and doctrinal limits of motor vehicle taxation.

Constitutional Framework: Taxing Power Over Vehicles

Entry 57, List II (State List)

The constitutional source of State power to levy vehicle tax lies in Entry 57 of List II of the Seventh Schedule to the Constitution of India, which reads:

“Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads…”

The phrase “suitable for use on roads” is not decorative. It is a constitutional limitation. States are competent to tax only those vehicles that are fit, suitable, and intended for road use.

Article 265: No Tax Without Authority of Law

Article 265 reinforces this limitation by mandating that no tax can be levied or collected except by authority of law. Any taxing statute that exceeds constitutional competence is liable to be struck down or read down.

Thus, even if a State taxation statute uses wide language such as “all motor vehicles,” it cannot override the constitutional restriction embedded in Entry 57.

Statutory Scheme Under the Motor Vehicles Act, 1988

Definition of “Motor Vehicle” – Section 2(28)

Section 2(28) of the Motor Vehicles Act, 1988 defines a motor vehicle as:

“Any mechanically propelled vehicle adapted for use upon roads…”

Crucially, the definition contains an express exclusion:

“…but does not include a vehicle of a special type adapted for use only in a factory or in any other enclosed premises.”

This exclusion is central to the issue. Parliament has consciously carved out special-purpose vehicles designed exclusively for factory or enclosed use from the very definition of “motor vehicle”.

Gujarat Motor Vehicles Tax Act, 1958: Charging Provision

Section 3 of the Gujarat Motor Vehicles Tax Act, 1958 provides for levy of tax on motor vehicles “used or kept for use in the State.” However, the Act itself does not define “motor vehicle”, and instead adopts the definition under the Motor Vehicles Act, 1988.

This means that if a vehicle falls outside Section 2(28) of the Motor Vehicles Act, it automatically falls outside the charging provision of the State tax law.

Factual Matrix in Ultratech Cement Ltd.

Ultratech Cement Ltd., a major industrial manufacturer, used various heavy earth-moving machines such as dumpers, loaders, excavators, dozers, drills, and rock breakers within its cement plants in Gujarat.

The following facts were undisputed:

• The vehicles were never used on public roads.
• They were transported to the factory premises on trailers in dismantled condition.
• Manufacturers certified that they were off-road industrial vehicles.
• No road-worthiness certificates were issued.
• The Automotive Research Association of India confirmed they were not meant for road use.

Despite this, the Gujarat transport authorities demanded registration and road tax, relying on a broad interpretation of “motor vehicle.”

Supreme Court’s Core Legal Findings

1. Constitutional Limitation Cannot Be Bypassed

The Court held that the Gujarat Tax Act cannot travel beyond Entry 57 of List II. Since the Constitution permits taxation only of vehicles suitable for use on roads, vehicles exclusively designed for off-road industrial use are outside State taxing competence.

2. Second Part of Section 2(28) is Determinative

The Supreme Court emphasised that the exclusion of “special type vehicles adapted for use only in a factory or enclosed premises” is not incidental but substantive.

Even if such vehicles are mechanically propelled and capable of movement, they are statutorily excluded from the category of motor vehicles when their design and use are confined to enclosed premises.

3. Actual Use and Design Matter More Than Theoretical Capability

The Court rejected the argument that the mere capability to move on roads attracts tax. The relevant inquiry is:

• What is the vehicle designed for?
• Where is it actually used?
• Does it derive benefit from public roads?

If the answer points to exclusive off-road, industrial use, road tax is impermissible.

Construction Equipment Vehicles Under CMV Rules

Rule 2(cab) of the Central Motor Vehicles Rules, 1989 defines “construction equipment vehicle” to include excavators, dumpers, loaders, dozers, graders, and similar machinery designed for off-highway operations.

The Supreme Court relied on this classification to reinforce that such vehicles are functionally and legally distinct from ordinary motor vehicles.

Role of Manufacturer and Expert Certifications

The Court gave significant evidentiary value to:

• Manufacturer certificates (BEML, Hindustan Motors)
• Automotive Research Association of India certifications
• Absence of road-worthiness certificates

Since the State failed to rebut these materials, it could not presume road suitability contrary to expert evidence.

Precedential Support: Bolani Ores Ltd.

The judgment reaffirms the landmark decision in Bolani Ores Ltd. v. State of Orissa (1974), where the Court held that:

• “Adapted for use upon roads” means suitable and intended for road use.
• Vehicles confined to mines or enclosed premises cannot be taxed merely because they are mechanically propelled.

The Court clarified that later judgments that diluted Bolani Ores did not consider the express exclusion clause in Section 2(28).

Distinguishing Contrary Decisions

The State relied on cases such as Natwar Parikh, Western Coalfields, and Jagannath Area. The Supreme Court distinguished them on the ground that:

• They did not examine the second part of Section 2(28).
• They dealt with vehicles actually used on roads or public places.
• They could not override constitutional limitations.

Ministry of Road Transport and Highways (13 July 2020)

Although not determinative, the Court noted that the Ministry of Road Transport and Highways clarified that off-road construction equipment vehicles do not require regular registration or taxation if not used on roads.

Such circulars, while not statutory, are binding on departmental authorities and reflect correct legal interpretation.

Conclusion

The Supreme Court’s decision in Ultratech Cement Ltd. v. State of Gujarat settles a long-standing controversy in motor vehicle taxation law. It reaffirms that road tax is compensatory, not punitive, and must correlate with actual use of public roads.

Excavators, dumpers, and similar construction equipment vehicles that operate exclusively within factory or enclosed premises are neither “motor vehicles” under Section 2(28) of the Motor Vehicles Act nor taxable under State motor vehicle taxation laws.

This judgment restores doctrinal clarity, constitutional fidelity, and practical fairness in the taxation of industrial machinery, while leaving no ambiguity that misuse of roads will attract full statutory consequences.

Important Link

Law Library: Notes and Study Material for LLB, LLM, Judiciary, and Entrance Exams