Tribunal grants Cenvat Credit for insuring public deposits, citing Larger Bench precedent

The Tribunal ruled in favor of the appellants, allowing them to avail Cenvat Credit for Service Tax paid on insuring public deposits with banks. The decision aligned with a Larger Bench precedent, establishing the eligibility of credit for services provided by the Deposit Insurance Corporation. The Tribunal emphasized the importance of following decisions of Larger Benches for consistency in legal interpretations. Consequently, the department's denial of credit was set aside, and the appeal was granted, providing consequential reliefs to the appellants.

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Issues:
Whether the appellants are eligible to avail Cenvat Credit of Service Tax paid for insuring public deposits with banks.

Analysis:
The appeal dealt with the eligibility of the appellants to claim Cenvat Credit on Service Tax paid for insuring public deposits with banks. The appellant argued that the issue had been addressed in a Larger Bench decision and a subsequent Division Bench decision, both supporting the eligibility for credit. The appellant contended that the Division Bench was bound by the Larger Bench decision, which established the eligibility of credit for services provided by the Deposit Insurance Corporation. On the other hand, the department relied on a different Division Bench decision, claiming that the Larger Bench decision was per incuriam as it did not consider a judgment by the Apex Court. The department argued that since the issue had been referred to a Larger Bench again, the previous decision was not applicable.

The Tribunal considered the conflicting arguments and referred to the Larger Bench decision in the case of M/s. South Indian Bank, where it was held that credit is indeed eligible on the service tax paid for insuring public deposits. The Tribunal emphasized that services provided by the Deposit Insurance Corporation to banks fell within the definition of "input service," crucial for banks to function and provide financial services. The Tribunal analyzed the nature of deposits and loans, distinguishing between accepting deposits and extending deposits, to support the eligibility of credit. The Tribunal also highlighted the importance of judicial discipline in following decisions of Larger Benches for uniformity and certainty in legal interpretations.

Ultimately, the Tribunal sided with the appellant, following the precedent set by the Larger Bench decision and setting aside the department's denial of credit. The Tribunal allowed the appeal, granting consequential reliefs to the appellants. The decision was pronounced in open court, emphasizing the resolution of the issue regarding the eligibility of Cenvat Credit for Service Tax paid on insuring public deposits with banks.

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