Tax Not Payable On Motor Vehicles Exclusively Used for Contract Inside Central Deposit Yard: Andhra Pradesh High Court

The Andhra Pradesh High Court has held that the motor vehicles exclusively used for the petitioner's contract inside the Central Deposit Yard of Rashtriya Ispat Nigam Limited (RINL) are not liable for taxation and are entitled to exemption.

The bench of Justice V. Sujatha has observed that the subject motor vehicles were deployed to the Central Deposit Yard Premises, and with effect from April 1, 2021, all the motor vehicles have stopped plying upon the public roads and were being used exclusively for the purpose of the petitioner's contract and were only plying inside the Central Deposit Yard but did not leave the compound of the Yard at any period of time. In such a case, the subject vehicles are not liable to be taxed, and such vehicles are entitled to an exemption.

The petitioner/assessee is a company registered under the Companies Act 1956 that has been engaged in the business of providing logistics support since 1985 and has diversified into the deployment of heavy lifting equipment required for infrastructure and construction projects. The petitioner company was awarded the contract for a period of 4.5 years for handling and storage of iron and steel material at the Central Dispatch Yard situated inside the Visakhapatnam Steel Plant, Andhra Pradesh, a corporate entity of Rashtriya Ispat Nigam Limited (RINL).

Upon allotment of the contract, the motor vehicles were deployed in batches to the Central Deposit Yard premises. With effect from April 1, 2021, all motor vehicles stopped plying upon the public roads and were thereafter used exclusively for the purpose of the contract and were to only ply inside the Central Deposit Yard premises and not leave the compound for any period of time until the end of the contract for any other use. Therefore, the vehicles were not used or kept for use on any of the roads maintained by the State of Andhra Pradesh. The Central Deposit Yard was enclosed by compound walls, and ingress and egress are regulated through the gates managed by the Central Industrial Security Force (CISF).

The petitioner company had intimated to the respondent regarding the "non-use" of the motor vehicles on public roads and requested to be exempt from payment of tax as the motor vehicles were no longer plying on public roads till the period of the contract in accordance with Section 3 of the Andhra Pradesh Motor Vehicles Taxation Act. But the respondents, without considering the petitioner’s representations and without conducting a proper assessment, inspected the motor vehicles and raised a demand without disclosing how the tax arrears, penalty arrears, etc. were raised in the demand notice.

The petitioner paid a total of Rs. 22,71,700 towards motor vehicle tax under protest, as the seizure of the vehicles would cause irreparable, consequential loss resulting in the halting of RINL operations itself.

The department contended that RINL is a government company and therefore falls within the definition of a public place.

The court noted that as the Central Deposit Yard is a highly restricted area with no ordinary member of the public having any access to enter the premises, the definition of "public place" under Section 2 (34) would not apply to the Yard.

The court directed the respondents to refund an amount to the petitioner on an application made by the petitioner seeking the refund.

Case Title: Tarachand Logistics Solutions Limited Versus State of Andhra Pradesh

Citation: 2023 LiveLaw (AP) 30

Case No.: Writ Petition No.38285 Of 2022

Date: 13/06/2023

Counsel For Petitioner: Yashodhan Thakur

Counsel For Respondent: Government Pleader

Click Here To Read The Order