2020 (10) TMI 300 - HC - Central Excise

CENVAT Credit - Deposit Insurance and Credit Guarantee Corporation for insuring the deposits of the customers - period after 01.04.2012 - HELD THAT - The service provided by the Deposit Insurance and Credit Guarantee Corporation to the banks for insuring the deposits of the public with the banks has been considered by the banks to be an input service and CENVAT credit for service tax paid by the banks for this service has been availed of by the banks for rendering output service. The issue involved is whether the banks can avail credit of this service tax paid by the banks for the service provided by the Deposit Insurance Corporation. The impugned order cannot be sustained and the same is accordingly set aside and quashed - Appeal allowed.

Summary

Issues:
- Eligibility of banks to avail CENVAT credit for service tax paid to Deposit Insurance and Credit Guarantee Corporation after 01.04.2012.

Analysis:
1. The appeals were filed by banks under section 35-G of the Central Excise Act, 1944 challenging the order passed by the CESTAT regarding the eligibility of banks to avail CENVAT credit for service tax paid to Deposit Insurance and Credit Guarantee Corporation post 01.04.2012.

2. The key issue before the CESTAT was whether banks could claim CENVAT credit for the service tax paid on insurance premium to insure deposits of customers after 01.04.2012. The CESTAT concluded that the insurance premium paid to the corporation was not an input service, hence disallowing the CENVAT credit for the service tax paid on such premium.

3. In a specific appeal by a bank, the court re-framed substantial questions of law related to the entitlement of banks to avail CENVAT credit for service tax paid on insurance premium. The appellant contended that the issue was already decided in their favor by previous tribunal decisions and requested the matter to be referred to a larger bench for consistency.

4. The court acknowledged conflicting decisions by different benches of the CESTAT and adjourned the appeals to allow the advocates to present the decision of a larger bench for consideration.

5. Eventually, a larger bench of the CESTAT ruled that the service provided by the Deposit Insurance Corporation to banks was an "input service," allowing banks to avail CENVAT credit for the service tax paid. Consequently, the impugned order was set aside, and all appeals were remanded back to the CESTAT for fresh decisions in line with the larger bench's ruling.

6. The appeals were allowed with no order as to costs, and the decision was to be digitally signed for further action by concerned parties.