Balaji Industrial Corporation Ltd. Vs Commissioner of Central Tax (CESTAT Hyderabad)
In Balaji Industrial Corporation Ltd. Vs Commissioner of Central Tax, the CESTAT Hyderabad addressed the issue of a company’s ability to transfer and utilize CENVAT credit between its manufacturing and service tax accounts. The appellant, Balaji Industrial Corporation Ltd., which was registered as both a manufacturer and a service provider, had discontinued its manufacturing operations. Subsequently, it transferred the remaining CENVAT credit from its Central Excise (ER-1) account to its service tax (ST-3) account to offset its service tax liability. The Commissioner of Central Excise and Service Tax denied this transfer, demanding the recovery of ₹75,13,704, along with interest and a penalty, arguing that no provision in the CENVAT Credit Rules, 2004, allowed for such a cross-utilization.
The core of the dispute was whether CENVAT credit accumulated on manufacturing inputs and services could be used to pay service tax when a company operates as a single entity with multiple registrations. The Revenue’s argument was that the credit was tied to the specific activity for which it was accrued and could not be transferred. The appellant, however, contended that the credit was a common pool accessible to a single entity, regardless of the different registrations.
