CENVAT credit on deposit insurance premium treated as input service for banks, following settled High Court reasoning.

Banks were held entitled to CENVAT credit of service tax paid on deposit insurance premium, because the premium was treated as an input service linked to the banking business. The Court followed the Larger Bench view and consistent High Court authority, including Kerala and Bombay, and found the issue no longer res integra. Finding no reason to depart from that settled reasoning, it answered the issue in favour of the assessee and against the Revenue.

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Issues: Whether banks were entitled to avail CENVAT credit of service tax paid on premium for deposit insurance obtained from the Deposit Insurance and Credit Guarantee Corporation.

Analysis: The dispute turned on whether the deposit insurance premium qualified as an input service for the banks. The controversy had already been resolved against the Revenue by the decision of the Larger Bench and thereafter by the High Court of Kerala, with similar approval by the Bombay High Court. In light of those decisions, the issue was treated as no longer res integra. The Court found no basis to take a different view and followed the earlier binding reasoning.

Conclusion: The banks were entitled to CENVAT credit on the premium paid for deposit insurance, and the issue was answered in favour of the assessee and against the Revenue.

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