Banks win appeal for CENVAT credit on service tax paid to Deposit Insurance Corporation

The appeals by banks challenging the disallowance of CENVAT credit for service tax paid to Deposit Insurance and Credit Guarantee Corporation post 01.04.2012 were successful. A larger bench of the CESTAT ruled that the service provided by the Corporation to banks constituted an "input service," enabling banks to claim CENVAT credit for the service tax paid. The impugned order was set aside, and all appeals were remanded for fresh decisions in accordance with the larger bench's ruling. The appeals were allowed with no costs, and the decision was to be digitally signed for further action.

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Issues:
- Eligibility of banks to avail CENVAT credit for service tax paid to Deposit Insurance and Credit Guarantee Corporation after 01.04.2012.

Analysis:
1. The appeals were filed by banks under section 35-G of the Central Excise Act, 1944 challenging the order passed by the CESTAT regarding the eligibility of banks to avail CENVAT credit for service tax paid to Deposit Insurance and Credit Guarantee Corporation post 01.04.2012.

2. The key issue before the CESTAT was whether banks could claim CENVAT credit for the service tax paid on insurance premium to insure deposits of customers after 01.04.2012. The CESTAT concluded that the insurance premium paid to the corporation was not an input service, hence disallowing the CENVAT credit for the service tax paid on such premium.

3. In a specific appeal by a bank, the court re-framed substantial questions of law related to the entitlement of banks to avail CENVAT credit for service tax paid on insurance premium. The appellant contended that the issue was already decided in their favor by previous tribunal decisions and requested the matter to be referred to a larger bench for consistency.

4. The court acknowledged conflicting decisions by different benches of the CESTAT and adjourned the appeals to allow the advocates to present the decision of a larger bench for consideration.

5. Eventually, a larger bench of the CESTAT ruled that the service provided by the Deposit Insurance Corporation to banks was an "input service," allowing banks to avail CENVAT credit for the service tax paid. Consequently, the impugned order was set aside, and all appeals were remanded back to the CESTAT for fresh decisions in line with the larger bench's ruling.

6. The appeals were allowed with no order as to costs, and the decision was to be digitally signed for further action by concerned parties.

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