2020 (10) TMI 909 - AT - Service Tax

CENVAT credit - input services - insurance service received by the bank from the Deposit Insurance and Credit Guarantee Corporation (DICGC) - 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 2020 (6) TMI 278 - CESTAT BANGALORE - LB has answered the reference holding that 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 . Appeal allowed - decided in favor of appellant.

Summary

Issues:
Eligibility of Cenvat Credit on insurance service received by a bank from DICGC.

Analysis:
The appeal involved a dispute regarding the eligibility of Cenvat Credit on the insurance service received by the appellant bank from DICGC. The appellant, a bank engaged in providing Banking and Other Financial Services, had availed Cenvat Credit on the service tax paid for Deposit Insurance Service provided by DICGC during the disputed period. The department disputed the availment of Cenvat Credit, arguing that such services lacked nexus with the actual performance of banking services by the appellant.

The Tribunal noted the highly debatable nature of the issue, with conflicting views by different benches. To resolve the dispute, a Larger Bench was constituted, which in a separate case involving South Indian Bank, held that the insurance service provided by DICGC to banks qualifies as an "input service." The Larger Bench's decision clarified that banks can avail Cenvat Credit on service tax paid for such services received from DICGC for rendering output services.

Based on the precedent set by the Larger Bench, the Tribunal concluded that the issue regarding the availment of Cenvat Credit on Deposit Insurance Service provided by DICGC was no longer res integara. Consequently, the Tribunal allowed the appeal filed by the appellant, setting aside the impugned order, while dismissing the appeal filed by the Revenue.

In summary, the judgment resolved the issue by affirming the eligibility of the appellant bank to avail Cenvat Credit on the insurance service received from DICGC, in line with the decision of the Larger Bench. The decision provided clarity on the interpretation of "input service" in the context of banking services, ensuring consistency in the treatment of such services for Cenvat Credit purposes.