Mandatory deposit insurance premium qualifies as input service, allowing CENVAT credit for banks using the service in operations.

Mandatory deposit insurance premium paid by a bank under the statutory deposit insurance regime qualified as an input service because it was commercially expedient and integral to carrying on banking operations and providing taxable output services. The service was used by the provider of output service for providing such output service, bringing it within the main part of the input service definition. Since it was not shown to fall within any exclusion, CENVAT credit on the service tax paid on the premium was admissible. The demands, interest, and penalties were therefore unsustainable, and the adjudication orders were set aside with consequential relief.

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Issues: Whether service tax paid on deposit insurance premium under the statutory deposit insurance regime is eligible for CENVAT credit as an input service.

Analysis: The deposit insurance service was mandatory for banks and was necessary for carrying on banking operations and providing taxable output services. The insurance service obtained from the Deposit Insurance Corporation was treated as commercially expedient and integral to the banking business. The service fell within the main part of the definition of input service because it was used by the provider of output service for providing such output service. Once covered by the main part, it was unnecessary to examine the inclusive limb, and the service was not shown to be excluded from the definition.

Conclusion: CENVAT credit on the service tax paid on deposit insurance premium was admissible and the assessee's claim succeeded.

Final Conclusion: The demands, interest, and penalties could not be sustained, and the adjudication orders were set aside with consequential relief.

Ratio Decidendi: A mandatory statutory insurance service received by a bank for conducting its output banking services falls within the main part of the definition of input service, so CENVAT credit of tax paid on that service is allowable.

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