2024 (7) TMI 1001 - AT - Service Tax

Banks Can Avail Cenvat Credit for Service Tax on DICGC Insurance Services, Tribunal Rules, Aligning with Larger Bench.

The Tribunal ruled in favor of the appellants, allowing banks to avail Cenvat Credit for Service Tax paid to the Deposit Insurance and Credit Guarantee ... Cenvat Credit of Service Tax - input service - credit for rendering output service, paid for the insurance service provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC) to them for insuring the deposits of the public with them by considering it as an ‘input service’ - HELD THAT:- Larger Bench of the Tribunal has been constituted in the matter of M/S. SOUTH INDIAN BANK VERSUS THE COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX-CALICUT [2020 (6) TMI 278 - CESTAT BANGALORE - LB] to resolve whether the banks can avail Cenvat Credit of Service Tax paid by the banks for the service provided by the Deposit Insurance and Credit Guarantee Corporation. The Larger Bench of the Tribunal examined at length the provisions of the Finance Act, Cenvat Credit Rules, the Deposit Insurance Act and the Regulations and it also considered the decision of the Hon'ble High Court of Karnataka in the matter of THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX & CUSTOMS, BANGALORE (ADJUDICATION) , THE COMMISSIONER OF SERVICE TAX VERSUS M/S. PNB METLIFE INDIA INSURANCE CO. LTD. [2015 (5) TMI 68 - KARNATAKA HIGH COURT]. After examining, the Larger Bench of the Tribunal in South Indian Bank observed that the service rendered by the Deposit Insurance and Credit Guarantee Corporation to the banks would fall in the main part of the definition in ‘input service’, which is any service used by a provider of output service for providing an output service and so once this falls in the main definition of input service it would not be necessary to examine whether the service would be covered by the inclusive part of the definition. Appellant are eligible to avail Cenvat Credit of the Service Tax paid by them to the Deposit Insurance and Credit Guarantee Corporation for insurance service provided by the said Corporation - the impugned orders are set aside - appeal allowed. Issues:Whether banks can avail Cenvat Credit of Service Tax paid for insurance service provided by DICGC as an input service for rendering output serviceRs.Analysis:The judgment involves a common issue regarding whether banks can claim Cenvat Credit of Service Tax paid for insurance service provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC) as an input service for rendering output service. The Tribunal considered conflicting views and the decision of a Larger Bench in the matter of South Indian Bank to resolve the issue. The Larger Bench determined that the service provided by DICGC to banks falls within the definition of 'input service' and is not excluded from it. The Tribunal held that banks can avail Cenvat Credit for the Service Tax paid for this service, as it is used by banks for providing output services. The Tribunal rejected the contention that accepting deposits is in the negative list of services under the Finance Act, 1994.The Tribunal noted that a previous appeal was dismissed but remanded by the High Court for fresh decision in line with the Larger Bench decision. The Tribunal considered the provisions of the Finance Act, Cenvat Credit Rules, Deposit Insurance Act, and relevant regulations. It also referenced the decision of the Hon'ble High Court of Karnataka in Commissioner vs. PNB Metlife India Insurance Co. Ltd. The Tribunal emphasized that the service provided by DICGC to banks qualifies as an input service, enabling banks to avail Cenvat Credit for the Service Tax paid. The Tribunal highlighted that the issue has been settled by the decision of the Larger Bench in the South Indian Bank case, which was upheld by various High Courts.In light of the consistent decisions and the precedent set by the Larger Bench, the Tribunal decided in favor of the appellants. It held that banks are eligible to avail Cenvat Credit for the Service Tax paid to DICGC for insurance services provided. Consequently, the impugned orders were set aside, and the appeals filed by the appellants were allowed. The judgment reaffirms the position established by the Larger Bench and other recent decisions, providing clarity on the eligibility of banks to claim Cenvat Credit for such services.