2021 (1) TMI 181 - AT - Service Tax

CENVAT Credit - input services - deposit insurance service provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC) - HELD THAT - In the decision of the Larger Bench of the Tribunal in South Indian Bank vs. The Commissioner of Customs, Central Excise Service Tax-Calicut 2020 (6) TMI 278 - CESTAT BANGALORE it has been held that insurance service provided by the DICGC to the Banks for insuring the deposits of the public with the Banks is an Input Service in terms of Rule 2(l) of CCR and Cenvat credit for the service tax paid by the banks for this service can be availed by the banks for rendering output service. In view of the decision of the Larger Bench of the Tribunal in the matter of South Indian Bank, it can be concluded that the issue involved in the instant Appeal is no longer res integra. Credit is allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of the Appellant to avail Cenvat credit for service tax paid on deposit insurance service provided by DICGC.

Analysis:
The Appellant, engaged in banking and financial services, was denied Cenvat credit by the department on the grounds that the service in question did not qualify as an "Input Service" under Rule 2(l) of CCR. The main issue revolved around whether the Appellant could avail Cenvat credit for the service tax paid on the deposit insurance service provided by DICGC.

The Tribunal considered the arguments presented by both parties, along with the decision of the Larger Bench of the Tribunal in the case of South Indian Bank vs. The Commissioner of Customs, Central Excise & Service Tax-Calicut. The Larger Bench had ruled that the insurance service provided by DICGC to banks for insuring public deposits qualified as an "Input Service" under Rule 2(l) of CCR. Consequently, Cenvat credit for the service tax paid by banks for this service could be availed by them for rendering output services. This decision was further upheld by the Hon'ble High Court of Judicature at Bombay in the case of Bank of Maharashtra vs. Commissioner, CGST&CX, Pune-II. The High Court allowed appeals filed by various banks based on the decision of the Larger Bench and remanded the appeals back to the Tribunal for fresh decisions in line with the Larger Bench's ruling.

In light of the precedent set by the Larger Bench of the Tribunal and the subsequent affirmation by the High Court, the Tribunal concluded that the issue at hand was no longer a matter of first impression. Therefore, the Tribunal allowed the instant Appeal filed by the Appellant, granting them the eligibility to avail Cenvat credit for the service tax paid on the deposit insurance service provided by DICGC.

The Order was pronounced in open court on 06.01.2021, marking the resolution of this appeal in favor of the Appellant.