2019 (6) TMI 1534 - AT - Service Tax

CENVAT Credit - input services - Insurance Premium paid by banks to Deposit Insurance Credit Guarantee Corporation - difference of opinion - HELD THAT - There is a need for bringing constituency in the matter in dispute by way of constitution of a Larger Bench. Hon ble President CESTAT is requested to constitute a Larger Bench which may bring clarity to the following points of law (i) Whether insurance premium paid by the Banking Institutions to DICGC to secure deposits of the customer comes within the definition of service for which Service Tax is to be paid by the Bank which is not insuring its own asset but insuring the deposits of the customers. (ii) Whether Service Tax paid on insurance premium to DICGC for insuring deposits is eligible input credit for the Banking Institutions.

Summary

Issues Involved:
Admissibility of Cenvat credit for Service Tax on Insurance Premium paid by banks to DICGC for mandatory insurance coverage of customer deposits.

Analysis:

The appeal addressed the admissibility of Cenvat credit concerning the Service Tax charged on Insurance Premium paid by banks to DICGC for providing mandatory insurance coverage to customer deposits. The issue highlighted contradictory findings by Division Benches of CESTAT in various cases. Notably, in some cases like DGB Bank Ltd. v. CCE and M/s. Punjab National Bank v. Commissioner of Central Excise Service Tax, the findings favored the assessee-appellant Banking Institutions. However, in a different case, the Division Bench of CESTAT-Mumbai held the credit on tax collected towards insurance premium paid to DICGC as inadmissible, stating that the entire deposit scheme does not fall within the definition of service. Consequently, a Larger Bench was requested to bring clarity on two main points of law.

The first point of law to be clarified by the Larger Bench is whether the insurance premium paid by Banking Institutions to DICGC for securing customer deposits falls within the definition of service for which Service Tax is payable by the Bank. This point emphasizes that the Bank is insuring customer deposits, not its own assets. The second point of law seeks clarification on whether the Service Tax paid on insurance premium to DICGC for insuring deposits qualifies as eligible input credit for the Banking Institutions.

In conclusion, the appeal resulted in the release of the file of Appeal Nos. ST/88150/18, ST/88151/18 of M/s. Citizen Credit Co-Op. Bank Ltd. for submission to the Registry pending the final verdict of the Larger Bench of CESTAT. The order was pronounced in court on 27-6-2019, highlighting the need for a Larger Bench to address the conflicting interpretations and provide clarity on the admissibility of Cenvat credit in such cases.