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2023 (12) TMI 435 - AT - Service TaxCENVAT Credit - input service or not - Insurance Premium paid to Deposit Insurance Credit Guarantee Corporation (DICGC) - HELD THAT - The issue is no longer res-integra and the same have been adjudicated by the Hon ble Kerala High Court in THE PRINCIPAL COMMISSIONER OF CENTRAL TAX CENTRAL EXCISE, COCHIN VERSUS M/S SOUTH INDIAN BANK AND M/S CATHOLIC SYRIAN BANK LTD 2022 (12) TMI 1479 - KERALA HIGH COURT the High Court relying on the ruling of Larger Bench of this Tribunal in South Indian Bank being Final Order No. 20691-30708/2020 dated 23.09.2020 2020 (11) TMI 120 - CESTAT BANGALORE , have held that similarly situated assessee like banks are entitled to take Cenvat Credit on the premium paid to DICGC for the insurance services rendered by DICGC to the banks. Hon ble High Court observed that without accepting deposits the bank cannot extend loans which is necessary to earn profit and the banks are under Statutory obligations to ensure the deposits received are issued for conducting the banking business. Further, the commercial banks face the risk of being dilicensed by the RBI if they did not insure the deposits with the DICGC (subsidiary of RBI). The impugned order is set aside - Appeal allowed.
Issues involved: Whether the appellant bank rightly took Cenvat Credit of the Insurance Premium paid to Deposit Insurance & Credit Guarantee Corporation (DICGC).
The appellant, a bank, accepted deposits in various forms and charged fees related to deposit accounts. The business of banking in India is regulated by the Banking Regulations Act, 1949, and the Deposit Insurance & Credit Guarantee Corporation (DICGC) Act, 1961. Commercial banks are required to register with DICGC and pay premiums on deposits as mandated by the Acts. The appellant bank availed Cenvat Credit on the service tax paid on insurance premium to DICGC, which is essential for carrying on the banking business in India. A Show Cause Notice was issued to the appellant bank, contending that the DICGC insurance premium is not an input service, thus the bank is not entitled to avail the Cenvat Credit. Despite the appellant's detailed reply and submissions, the Learned Commissioner confirmed the demand for Service Tax, Education Cess, Interest, and Penalties. The issue was brought before the Tribunal, where it was observed that a similar matter had been adjudicated by the Hon'ble Kerala High Court. The High Court, relying on the ruling of the Larger Bench of the Tribunal, held that banks are entitled to take Cenvat Credit on the premium paid to DICGC for insurance services. The High Court emphasized the importance of accepting deposits for extending loans, which is crucial for banks to earn profits, and highlighted the statutory obligations of banks to insure deposits with DICGC to avoid being delicensed by the RBI. Considering the precedent set by the Larger Bench and the decision of the Hon'ble Kerala High Court, the Tribunal allowed the appeal, setting aside the impugned order. The appellant was granted consequential reliefs as per the law.
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