2022 (6) TMI 539 - AT - Service Tax

CENVAT Credit - Service Tax paid on deposit insurance service provided by Deposit Insurance and Credit Guarantee Corporation (DICGC) - HELD THAT - The said issue was considered by the Larger Bench of the Tribunal in the case of M/S. SOUTH INDIAN BANK VERSUS THE COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX-CALICUT 2020 (6) TMI 278 - CESTAT BANGALORE wherein it was held that insurance service provided by DICGC to the banks is an input service and the credit of Service Tax is eligible - In the appellant s own case M/S. INDIAN OVERSEAS BANK VERSUS COMMISSIONER OF CCE AND ST, CHENNAI 2021 (1) TMI 754 - CESTAT CHENNAI , the Tribunal, for a different period, has followed the decision of the Larger Bench and held that the credit is eligible. There are no hesitation to hold that the credit of the Service Tax paid on the basis of premium paid to DICGC is eligible. The impugned order disallowing the credit and confirming the demand, interest and penalty is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Whether the appellant-bank can avail credit of Service Tax on deposit insurance service provided by DICGC.

Analysis:
The case involved an appeal where the appellant-bank was alleged to have wrongly availed CENVAT Credit on Service Tax paid for deposit insurance service provided by DICGC. The investigation by DGCEI indicated that the credit availed was ineligible, leading to the issuance of a Show Cause Notice proposing disallowance of credit, recovery of the amount with interest, and imposition of penalties. The Original Authority confirmed the demand, interest, and penalties, including a separate penalty on the Former Chief Financial Officer. The appellants challenged this decision before the Tribunal.

In the arguments presented by Ms. Shwetha Vasudevan, it was contended that the DICGC, being a subsidiary of the Reserve Bank of India, provides deposit insurance services under the DICGC Act. The appellant-bank paid Service Tax on the premium to insure deposits, considering it as an input service. The counsel cited precedents, including a decision by the Larger Bench of the Tribunal and a previous judgment in the appellant's own case, to support the eligibility of credit for Service Tax paid on such services.

On the other hand, Ms. K. Komathi, the Authorized Representative for the respondent, supported the findings of the impugned order disallowing the credit. The Tribunal deliberated on whether the credit availed by the appellant-bank on Service Tax paid for insuring deposits with DICGC was eligible for CENVAT Credit. Referring to the decision of the Larger Bench and the appellant's previous case, the Tribunal concluded that the credit was indeed eligible. Consequently, the impugned order disallowing the credit, confirming the demand, interest, and penalties, was set aside, and the appeals were allowed with any consequential reliefs as per law.

In conclusion, the Tribunal's judgment clarified the eligibility of the appellant-bank to avail credit for Service Tax paid on deposit insurance services provided by DICGC, based on established legal precedents and interpretations. The decision provided relief to the appellants, overturning the earlier order and emphasizing compliance with the applicable tax laws and regulations.