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TMI Blog2024 (11) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... can be availed by the banks for rendering output services . Following the Interim Order of the Larger Bench, the Tribunal [ 2020 (6) TMI 278 - CESTAT BANGALORE - LB] allowed the appeal of South Indian Bank. The said order of the Tribunal was thereafter challenged by the Revenue before the Hon ble High Court of Kerala at Ernakulum by way of filing Central Excise Appeal No.1/2021 in the matter of Principal Commissioner of Service Tax and Central Excise, Kochi vs. South Indian Bank alongwith other connected appeals and the Hon ble High Court [ 2022 (12) TMI 1479 - KERALA HIGH COURT] dismissed the appeal filed by Revenue and upheld the decision of the Tribunal in South Indian Bank (supra). Nothing has been brought to our notice to show that any appeal has been filed by the Revenue against the aforesaid decision of Hon ble Kerala High Court, therefore, it attained attained finality. The view taken by the Larger Bench in the matter of South Indian Bank Ltd. (supra) has further been affirmed by another Larger Bench of the Tribunal in the matter of Bank of America, National Association vs. Principal Commissioner, CGST Central Excise, Mumbai [ 2024 (4) TMI 1149 - CESTAT MUMBAI] Allegation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed orders. 2. The issue involved herein is whether the appellant is entitled to avail cenvat credit of service tax paid on deposit insurance premium to Deposit Insurance and Credit Guarantee Corporation ? 3. Since the issue is common, therefore, we are disposing of both the appeals by this common order. The appellant i.e. Union Bank of India is providing banking and financial services and according to the department, they have wrongly availed cenvat credit in respect of service tax paid on deposit insurance service provided by Deposit Insurance and Credit Guarantee Corporation during the periods 11.04.2012 to 27.11.2013 and December, 2013 to June, 2015 since it did not qualify as input service as defined under Rule 2(l) of Cenvat Credit Rules, 2004. Accordingly, two show cause notices dated 27.5.2012 (for the period 11.04.2012 to 27.11.2013) and dated 29.7.2015 (for the period December, 2013 to June, 2015) respectively were issued to the appellant demanding inadmissible cenvat credit availed by the appellant alongwith appropriate rate of interest and penalty which culminated into impugned Orders-in-Original confirming the demand alongwith interest and penalty. 4. We have heard lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny as also new banking company as an insured bank and the insured bank has to pay premium to DICGC at the rates notified by them from time to time. In the event of banking failure/winding up/liquidation of a bank, DICGC protects the deposit of the customer upto maximum of Rs.5 lakh per depositor (earlier it was Rs.1 lakh). Banking company pays service tax on the insurance premium paid to DICGC and availed cenvat credit of such service tax for the output services which they provide in relation to banking and other financial services as defined under section 65 of Finance Act, 1994 by treating the service rendered by the DICGC as input service . 7. The banks claims that they are engaged in accepting deposits from the public, which deposits are used for the purpose of lending or investment and though no consideration is charged for making the deposits, but the banks thereafter provide number of services which are in relation to banking and other financial services and are chargeable to service tax as consideration for providing such services are not received in the form of interest. The list of services on which the banks have to pay service tax under banking and other financial servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Insurance Corporation can be availed by the banks for rendering output services . Relevant paragraphs of the Larger Bench decision in the matter of South Indian Bank (supra) are extracted hereunder:- 44. The basic activity of a banking company, as contemplated under the definition of banking , either under the Deposit Insurance Act or the Banking Regulation Act, is to accept deposits from the public, which deposits are used for the purpose of lending or investment by the banks. Thus, the main activity of a banking company is to mobilise the resources received by the banks in the form of deposits from the public for the purpose of lending or investment. These deposits, thus generate returns for the banks. A part of the returns is given by the banks to the depositors as a consideration, which consideration is normally in the form of interest. xxxx xxxx xxx 46. All banks have also to obtain a licence from the Reserve Bank of India under section 22 of the Banking Regulation Act. It also needs to be noticed that it is a compulsory for all banks who have obtained a licence from the Reserve Bank of India under section 22 of the Banking Regulation Act to register themselves with the Depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing the insurance service for which the banks pay service tax. It is this service tax paid by the banks on the insurance service received by the banks from the Deposit Insurance Corporation that is the bone of contention between the parties. 52. It is not in dispute that after accepting the deposits there are number of services on which the banks have to pay service tax under banking and other financial services . These services are in connection with both the accepting of deposits and lending activity of the banks. Banks would be able to lend only if they accept deposits. It has been seen that without payment of insurance premium on the outstanding deposits, banks will not be able to function or render any output service of banking and other financial services and the licence granted to the banks by the Reserve Bank of India can be cancelled. 53. Thus, the service rendered by the Deposit Insurance Corporation to the banks would fall in the main part of the definition of input service , which is any service used by a provider of output service for providing an output service. Once this service falls in the main part of the definition of input service , it would not be necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to staff held by bank before they are transferred to Provident Fund Commissioner, amount representing pay orders/ bankers cheques/ demand drafts issued by closing deposit accounts with or without reference to depositors, but remaining unpaid etc. Thus, the contention of the Department that insurance premium is paid only on the deposits of the customers cannot also be accepted. 56. It has also been submitted by learned Counsel appearing for the banks that even if it is assumed that some part of the deposit is not used for providing output service , then too the banks are still entitled for the credit availed on the insurance service provided by the Deposit Insurance Corporation as the banks have reversed 50% of the total CENVAT credit taken in terms of rule 6(3B) of the 2004 Rules. This rule 6(3B) provides that notwithstanding anything contained in sub-rules (1), (2) and (3), a banking company and a financial institution including a non-banking financial company, engaged in providing services by way of extending deposits, loans or advances shall pay for every month an amount equal to 50% of the CENVAT credit availed on inputs and input services in that month. The Circular dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issued. The Karnataka High Court examined whether CENVAT credit availed and utilized by the insurance company on service tax paid for re-insurance service is an input service for the output service of insurance that the company was providing and held that the process of issuance of the policy by the insurer and subsequent procurement of re-insurance policy from another company, which is a statutory requirement, is an integral part of the entire process and the insurance process does not come to end merely on the issuance of the insurance policy since it continues till the existence of term of policy. The High Court noted that since re-issuance has to be taken under section 101A of the Insurance Act, it is a statutory obligation and, therefore, has to be considered as having nexus with the output service and, therefore would be an input service , for which Cenvat credit can be availed .. 60. It needs to be noted that the aforesaid decision of the Karnataka High Court in PNB Metlife India has been accepted by the Central Board of Excise and Customs in the Circular dated 16 February,2018. The relevant paragraphs 8 and 8.1 are reproduced below: 8. Decision of the Hon ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeals of Department on identical issue while observing that the issue is not different which has fell for consideration of the Larger Bench of the Tribunal in South Indian Bank (supra). Hon ble High Court also observed that they are in agreement with the view taken by the Hon ble Division bench of Kerala High Court in approving the decision of Larger Bench of the Tribunal and that the Revenue is unable to urge any contention as to why the decision of Hon ble Kerala High Court accepting the decision of the Larger Bench of the Tribunal ought not to be accepted. 13. The view taken by the Larger Bench in the matter of South Indian Bank Ltd. (supra) has further been affirmed by another Larger Bench of the Tribunal in the matter of Bank of America, National Association vs. Principal Commissioner, CGST Central Excise, Mumbai ; 2024 (4) TMI 1149-CESTAT MUMBAI. 14. There is another allegation against the appellant that they have violated the provisions of Rule 4 (7) and 9(1) ibid by availing cenvat credit even before issuance of two invoices by DICGC. Learned Chartered Accountant on behalf of the appellant submits that it is the practice of the DICGC to issue invoices on the date of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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