2020 (10) TMI 910 - AT - Service Tax

CENVAT Credit - input service - Deposit Insurance Service provided by DICGC - output service is Banking and Other Financial Service - credit denied 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 M/S. SOUTH INDIAN BANK VERSUS THE COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX-CALICUT 2020 (6) TMI 278 - CESTAT BANGALORE , the Larger Bench of the Tribunal vide order dated 20.03.2020, reported in 2020-TIOL-861-CESTAT-BANG-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'. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Early hearing of appeal
- Service tax demand confirmation
- Availment of cenvat credit on Deposit Insurance Service
- Disputed nexus with banking services

Early Hearing of Appeal:
The Appellate Tribunal allowed the miscellaneous application for early hearing of the appeal filed by the appellant. Both sides consented, and the appeal was taken up for hearing and disposal on the same day in the interest of justice.

Service Tax Demand Confirmation:
The appeal was filed by M/s. Yes Bank Ltd. against the order passed by the Ld. Commissioner of Service Tax-I confirming a service tax demand of &8377; 6,86,10,057/- along with interest and an equal amount of penalty imposed on the appellant. The appellant was engaged in providing Banking and Other Financial Services (BOFS) as defined under the Finance Act, 1994.

Availment of Cenvat Credit on Deposit Insurance Service:
During the disputed period, the appellant had availed cenvat credit of service tax paid on Deposit Insurance Service provided by DICGC, considering it as an input service under the Cenvat Credit Rules, 2004. The department disputed the availment of Cenvat Credit, arguing that there was no nexus or connectivity between the service and the actual performance of banking services by the appellant.

Disputed Nexus with Banking Services:
The issue of availment of Cenvat Credit on Deposit Insurance Service was contentious, with conflicting views by different benches of the Tribunal. To resolve the dispute, a Larger Bench was constituted. Referring to the decision in the case of South Indian Bank Vs. Commissioner of Customs, Central Excise & Service Tax, Calicut, the Larger Bench held that the insurance service provided by the Deposit Insurance Corporation to banks qualifies as an "input service." Consequently, the Cenvat credit of service tax paid for this service could be availed by banks for rendering output services. Based on this decision, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.