2020 (10) TMI 581 - AT - Service Tax

CENVAT Credit - input service - Deposit Insurance Service provided by DICGC - denial on the ground that such services have no nexus or connectivity with the actual performance of the banking service provided by the assessee-appellant - HELD THAT - The issue with regard to availment of cenvat credit on the disputed service was highly debatable and there were conflicting views by different benches of the Tribunal. For resolving the dispute, the Larger Bench was constituted. In the case of South Indian Bank Vs. Commissioner of Customs, Central Excise Service Tax, Calicut, the Larger Bench of the Tribunal vide order dated 20.03.2020, reported in 2020-TIOL-861-CESTAT-BANG-LB has answered the reference in the following terms The insurance service provided by the Deposit Insurance Corporation to the banks is an input service and CENVAT credit of service tax paid for this service received by the banks from the Deposit Insurance Corporation can be availed by the banks for rendering output services . Thus, the issue arising out of the present dispute regarding availment of the Cenvat credit on Deposit Insurance Service provided by DICGC is no more res integra - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Early hearing of appeal requested by the appellant.
2. Appeal against service tax demand, interest, and penalty imposed on the appellant.
3. Dispute over availment of cenvat credit on Deposit Insurance Service.
4. Interpretation of input service under Cenvat Credit Rules, 2004.
5. Resolution of conflicting views by different benches through a Larger Bench decision.

Analysis:
1. The appellant filed a miscellaneous application seeking early hearing of the appeal, which was allowed by the Tribunal considering it in the interest of justice. The appeal was taken up for hearing and disposal on the same day with the consent of both parties.

2. The appeal was filed by M/s. Induslnd Bank Ltd. against the order passed by the Ld. Commissioner of Service Tax-I, Mumbai, confirming a service tax demand of &8377;6,03,53,951/- along with interest and penalty imposed on the appellant.

3. The dispute revolved around the availment of cenvat credit on Deposit Insurance Service by the appellant, which was challenged by the department on the grounds of nexus with the banking services provided by the appellant. The Tribunal noted the debatable nature of the issue with conflicting views by different benches.

4. The appellant considered the Deposit Insurance Service as an input service under Rule 2(l) of the Cenvat Credit Rules, 2004, for availing cenvat credit. The department disputed this claim, arguing the lack of connectivity with the actual banking services provided by the appellant.

5. To resolve the conflicting views on the issue, a Larger Bench decision in the case of South Indian Bank Vs. Commissioner of Customs, Central Excise & Service Tax, Calicut was referred to. The Larger Bench clarified that the insurance service provided by the Deposit Insurance Corporation to banks qualifies as an input service, allowing banks to avail CENVAT credit for rendering output services. Based on this decision, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.