Appellate Tribunal allows bank's appeal on service tax demand, recognizing Deposit Insurance Service as valid input service.

The Appellate Tribunal allowed the early hearing of the appeal filed by the appellant regarding the confirmation of a service tax demand. The appellant, a bank, had availed cenvat credit on Deposit Insurance Service, which was disputed by the tax department. A Larger Bench determined that the insurance service provided by the Deposit Insurance Corporation qualifies as an "input service," allowing banks to avail Cenvat credit. Consequently, the Tribunal set aside the order confirming the service tax demand and ruled in favor of the appellant bank.

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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.

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