The Supreme Court has delivered a significant verdict clarifying that motor vehicle tax is applicable only to vehicles used or kept for use in public areas. The court emphasized that the rationale behind levying motor vehicle tax is to compensate for the use of public infrastructure like roads and highways. Therefore, vehicles operating exclusively within enclosed premises, such as factories or plants, are exempt from this tax, as these areas do not constitute a "public place".

The ruling came in the context of an appeal related to the Andhra Pradesh Motor Vehicle Taxation Act, 1963, which stipulates that tax can be levied on vehicles "used or kept for use in a public place". The Supreme Court, comprising Justices Manoj Misra and Ujjal Bhuyan, strictly interpreted this section, aligning it with the definition of "public place" under the Motor Vehicles Act, 1988. According to Section 2(34) of the Motor Vehicles Act, a public place is defined as an area "to which the public have a right of access," including roads, streets, and places where passengers are picked up or dropped off by stage carriages.

The dispute arose from a contract between M/s Tarachand Logistic Solutions Limited and Visakhapatnam Steel Plant (RINL). Tarachand Logistic Solutions deployed 36 vehicles for logistical work solely within the steel plant's central dispatch yard, an area enclosed by compound walls and guarded by CISF personnel. These vehicles never operated on public roads, leading the company to seek exemption from motor vehicle tax.

The State Transport Department rejected this request and demanded over ₹22 lakh, which the company paid under protest. The Andhra Pradesh High Court's Division Bench upheld this demand. Subsequently, the company appealed to the Supreme Court, which overturned the High Court's decision.

In its judgment, the Supreme Court held that the steel plant's premises, being secured and access-controlled, did not qualify as a public place, regardless of its ownership by a government company. The court underscored that the primary requirement for levying motor vehicle tax is the vehicle's use or intended use in a public place. If a vehicle isn't used or kept for use in a public place, the owner should not be burdened with the tax, as they are not benefiting from public infrastructure.

The Supreme Court clarified that motor vehicle tax is compensatory and has a direct link to the vehicle's end use. The bench stated that the tax is intended for individuals using public infrastructure like roads and highways. If a vehicle is confined to a restricted area and not used on public roads, it falls outside the purview of the motor vehicle tax.

The court also addressed the argument regarding Rule 12A of the Andhra Pradesh Motor Vehicles Taxation Rules, 1963, which pertains to intimation of non-use of vehicles. The court clarified that even without such intimation, vehicles not used in a public place cannot be subjected to tax. The purpose of Rule 12A is to facilitate the implementation of Section 3 of the Act, ensuring that tax is levied only on vehicles used or intended for use in public places.

The Supreme Court's decision sets aside the Andhra Pradesh High Court's Division Bench order and restores the Single Judge's ruling, allowing Tarachand Logistic Solutions to claim exemption for the period its vehicles were confined within the RINL premises. This ruling provides clarity on the applicability of motor vehicle tax, linking it directly to the use of public infrastructure and offering relief to vehicles operating exclusively within private or restricted areas.