Construction teams reportedly had crossed into the town of Arunachal Pradesh - an area India considers to be one of its 29 states, but China claims the zone as part of southern Tibet.
The territory became a key focus of a 1962 war fought between the Asian giants, and remains a hotly contested region.
At the end of December, Chinese personnel almost came to blows with Indian officials are they were allegedly caught doing railway track construction work in the area.
When the workers were confronted by Indian troops, they returned but left their road building equipment - which was damaged by locals in a fit of rage.