2019 (2) TMI 583 - AT - Service Tax

CENVAT Credit - input services - insurance deposits - case of Revenue is that insurance taken by the appellant is not input service as the same is not used in discharge of output service - Held that - Revenue has no force in their argument since no banker will prefer to take risk against the financial services provided by not taking insurance. Moreover same is mandatory in terms of DICGE. And accordingly, they have taken the insurance cover which will definitely form the part of input service for the output service being rendered by them - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Entitlement to Cenvat Credit on insurance deposits as an input service under Rule 2(l) of Cenvat Credit Rules, 2004.

Analysis:
The appeals in this case revolve around the entitlement of the appellant to Cenvat Credit on insurance deposits, with specific focus on whether insurance of deposit qualifies as an input service under Rule 2(l) of Cenvat Credit Rules, 2004. The demands made on the appellant, including interest, penalty, and personal penalty on the Chief Financial Officer, were contested. The Adjudicating Authority had denied the appellant the right to avail and utilize Cenvat Credit on insurance deposits. The appellant argued that insurance of deposits is crucial for securing the retained money, citing statutory provisions under DICGC mandating deposit insurance. They contended that paying service tax on insurance premiums made them eligible for Cenvat Credit. Reference was made to precedents like the case of DGB Bank Ltd. vs. CCE, Commissioner of Service Tax-I, Mumbai and Final Order No. 52877/2018 in the matter of M/s Punjab National Bank vs. Commissioner of Central Excise Service Tax, Bhopal, where similar credits were allowed.

The Revenue, represented by the Ld. AR, opposed the appellant's claim, asserting that insurance on deposits does not qualify as an input service since it is not used in discharging output services. The Tribunal, comprising Mr. Bijay Kumar and Mrs. Rachna Gupta, carefully considered the arguments presented by both sides along with the appeal records. They noted that the issue at hand had been previously addressed by a coordinate bench of the Tribunal, which supported the appellant's position. The Tribunal found merit in the appellant's stance, highlighting the essential nature of insurance for financial institutions like banks and the mandatory requirement under DICGC. The Tribunal concluded that the insurance cover taken by the appellant indeed constituted an input service for the output services provided by them. Consequently, the impugned order was set aside, and the appeals were allowed, with any consequential relief to follow.

This judgment underscores the significance of insurance deposits as an essential component of banking operations, warranting the recognition of insurance expenses as input services eligible for Cenvat Credit. The decision aligns with established precedents and industry practices, emphasizing the necessity of insurance coverage in the banking sector for managing risks associated with financial services.