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TMI Blog2025 (1) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Priyesh Bheda , Joint Commissioner ( AR ) for the respondent ORDER PER : C J MATHEW M/s Axis Bank Ltd is in appeal against denial of CENVAT credit of ₹ 59,68,88,683, availed by them between June 2012 and December 2013, on tax arising on premium charged by Deposit Insurance and Credit Guarantee Corporation (DICGC), that was sought to be recovered under section 73 of Finance Act, 1974, attended upon with appropriate interest under section 75 of Finance Act, 1994, while imposing penalty of like amount under rule 14 of CENVAT Credit Rules, 2004 in order [order-in-original no. 22/STC-V/SKD/2015-16 dated 26th May 2016] of Commissioner of Service Tax-V, Mumbai. 2. Following the resolution of dispute on taxability of the premium so paid by all banks under the mandate of Reserve Bank of India (RBI) on insurance cover of small deposit in the event of bank failure, the tax leviable thereon under Finance Act, 1994 charged on such premium was being availed by the beneficiary banks which, in several dispute, came before the Tribunal. In the light of conflicting decisions, the matter came to be referred to Hon'ble President for constitution of Larger Bench to rule on the proper inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid on re-insurance services by treating the said service as an "input service". PNB Metlife India Insurance Company was carrying on life insurance business and on the insurance policy issued by it, service tax was charged from the customers. It also procured re-insurance service from overseas insurance companies and availed Cenvat credit of service tax paid on such services received by it. This Cenvat credit was denied by the Department for the reason that re-insurance service cannot be considered as an "input service" since it takes place after the insurance policy 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 the term of the policy. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the provision of giving the Cenvat credit is so that there may not be double taxation. If a person has collected service tax, no doubt the same has to be deposited, but if in the process of the same transaction he has paid some service tax, which is necessary for its business, then he is entitled to the Cenvat credit to the extent of service tax which has been paid by it. In the present case, if the entire Service Tax which is collected by the insurer, while selling its insurance policies, has to be deposited without being given the credit of the tax which is paid by it while procuring a policy of re-insurance as (mandatorily required in law), the same would be against the ethos of Cenvat credit policy, as the same would amount to double taxation, which is not permissible in law." 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 of Karnataka at Bangalore dated 9-4-2015 in the case of M/s. PNB Metiife India Insurance Company Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the aforesaid decisions that banks can avail Cenvat credit of the service tax paid by the banks on the premium amount paid to Deposit Insurance Corporation for the insurance service rendered by the Deposit Insurance Corporation to the banks. 64. This view has been taken by the Tribunal in State Bank of Bikaner. However, in ICICI Bank a contrary view was taken. For "all the reasons stated above, it is not possible to accept the view taken by the Division Bench of the Tribunal in ICICI Bank. 65. The reference is, accordingly, answered 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'." 7. Thereafter, the reference to the Hon'ble President to have the matter considered by a Larger Bench was taken by a Larger Bench of the Tribunal in Bank of America, National Association v. Principal Commissioner of CGST & Central Excise, Mumbai East and by interim order no 14-18/2024 dated 30th April 2024, disposing off reference in appeal [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k like the assessee and the compliances of which were mandatory. It is in the course of availing such insurance service for the benefit of the depositors, the petitioner was required to pay the premium on which service tax was paid, and of which, input tax credit was sought to be availed. In our opinion, the CESTAT has rightly observed that the issue stands squarely covered by the decision of the Larger Bench. 10. We are also in agreement with the view taken by the Division Bench of the Kerala High Court in approving the decision of the Larger Bench. We may note hereunder the relevant observations of the Division Bench of the Kerala High Court in the case of "The Principal Commissioner of Central Tax/Central Excise vs. M/s. South Indian Bank (supra), to which we subscribe:- ***** 11. In the above context, we do not find ourselves persuaded to accept the case of the appellant/revenue that the questions of law as framed would at all arise. The revenue is also not before us to contend that there is some issue which has not been addressed by the Division Bench of the Kerala High Court or has missed its attention on issue of law and which would be relevant in the context of the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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