CENVAT credit on deposit insurance premium upheld for banks as an input service under the settled banking tax controversy.

Banks were held entitled to CENVAT credit of service tax paid on deposit insurance premium paid to DICGC, because banking activity was treated as a service and the premium was treated as an input service for credit purposes. The Court followed the Kerala High Court's detailed ruling on the same controversy, noted that the Bombay High Court had taken the same view, and held that no distinguishing feature or valid revenue objection justified a different conclusion. The issue was therefore treated as settled and the assessee's entitlement to the credit was upheld.

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Issues: Whether the banks were entitled to CENVAT credit of service tax paid on deposit insurance premium paid to DICGC, including the questions whether banking activity constituted a service or output service and whether deposit insurance qualified as an input service.

Analysis: The Tribunal had allowed the assessee's claim by following the Larger Bench decision. The Court noted that the same controversy had already been considered in detail by the High Court of Kerala, which, after examining the relevant regulatory framework governing banking and the reasoning of the Larger Bench, answered the issue in favour of the assessee. The Court also noticed that the Bombay High Court had taken the same view. The objections raised by the Revenue did not warrant a different view, and the controversy was treated as no longer res integra.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Final Conclusion: The Court adopted the view already taken by the Kerala High Court on the same legal controversy and upheld the assessee's entitlement to the credit claimed, resulting in dismissal of the Revenue's appeals.

Ratio Decidendi: Where the same legal controversy has been conclusively decided by a coordinate High Court on an identical statutory and factual setting, and no distinguishing feature is shown, the later Court may follow that view and treat the issue as settled.

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