TaxTMI 
TaxTMI 
2024 (11) TMI 1226
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.... been deducted by the Adjudicating Authority from the amount to be recovered while passing the impugned orders. 2. The issue involved herein is whether the appellant is entitled to avail cenvat credit of service tax paid on deposit insurance premium to 'Deposit Insurance and Credit Guarantee Corporation'? 3. Since the issue is common, therefore, we are disposing of both the appeals by this common order. The appellant i.e. Union Bank of India is providing 'banking and financial services' and according to the department, they have wrongly availed cenvat credit in respect of service tax paid on deposit insurance service provided by 'Deposit Insurance and Credit Guarantee Corporation' during the periods 11.04.2012 to 27.11.2013 and December, 2013 to June, 2015 since it did not qualify as 'input service' as defined under Rule 2(l) of Cenvat Credit Rules, 2004. Accordingly, two show cause notices dated 27.5.2012 (for the period 11.04.2012 to 27.11.2013) and dated 29.7.2015 (for the period December, 2013 to June, 2015) respectively were issued to the appellant demanding inadmissible cenvat credit availed by the appellant alongwith appropriate rate of interest and penalty which culmi....
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....Banking in India is governed by the Banking Regulation Act, 1949. DICGC transacts the business of insuring the deposits accepted by the banks. It has to register every existing 'banking company' as also 'new banking company' as an insured bank and the insured bank has to pay premium to DICGC at the rates notified by them from time to time. In the event of banking failure/winding up/liquidation of a bank, DICGC protects the deposit of the customer upto maximum of Rs.5 lakh per depositor (earlier it was Rs.1 lakh). Banking company pays service tax on the insurance premium paid to DICGC and availed cenvat credit of such service tax for the "output services" which they provide in relation to 'banking and other financial services' as defined under section 65 of Finance Act, 1994 by treating the service rendered by the DICGC as "input service". 7. The banks claims that they are engaged in "accepting" deposits from the public, which deposits are used for the purpose of lending or investment and though no consideration is charged for making the deposits, but the banks thereafter provide number of services which are in relation to "banking and other financial services" and are chargeable....
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....dered as an 'input service'? 10. Larger Bench of the Tribunal after examining various provisions of Finance Act, Cenvat Credit Rules, Deposit Insurance Act and the Regulations has answered the reference in the following terms: "The insurance service provided by the Deposit Insurance Corporation to the banks is an "input service" and Cenvat Credit of service tax paid for this service received by the banks from the Deposit Insurance Corporation can be availed by the banks for rendering 'output services'." Relevant paragraphs of the Larger Bench decision in the matter of South Indian Bank (supra) are extracted hereunder:- "44. The basic activity of a banking company, as contemplated under the definition of "banking", either under the Deposit Insurance Act or the Banking Regulation Act, is to accept deposits from the public, which deposits are used for the purpose of lending or investment by the banks. Thus, the main activity of a banking company is to mobilise the resources received by the banks in the form of deposits from the public for the purpose of lending or investment. These deposits, thus generate returns for the banks. A part of the returns is given by....
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....terest of the depositors is not sufficiently protected then under the third requirement the licence of the bank can also be cancelled by the Reserve Bank of India. 50. It cannot, therefore, be doubted that the insurance service received by the banks from the Deposit Insurance Corporation is not only mandatory but is also commercially expedient. In fact, without this service the banks may not be able to function at all. 51. Premium is paid by the banks to the Deposit Insurance Corporation for providing the insurance service for which the banks pay service tax. It is this service tax paid by the banks on the insurance service received by the banks from the Deposit Insurance Corporation that is the bone of contention between the parties. 52. It is not in dispute that after accepting the deposits there are number of services on which the banks have to pay service tax under "banking and other financial services". These services are in connection with both the "accepting" of deposits and "lending" activity of the banks. Banks would be able to lend only if they accept deposits. It has been seen that without payment of insurance premium on the outstanding deposit....
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....s. It is, therefore, not possible to accept the contention of the Department that "accepting" of deposits is covered under section 66D(n) of the Finance Act. 55. The Assessable deposits, on which the premium is calculated, not only includes deposits such as savings, fixed, current, recurring, etc., but also certain balances appearing in the account of the banks such as credit balances in cash credit accounts, margin held against letters of credit, guarantees, bills purchased, etc., un-presented drafts and payment orders, provident fund balances relating to staff held by bank before they are transferred to Provident Fund Commissioner, amount representing pay orders/ bankers cheques/ demand drafts issued by closing deposit accounts with or without reference to depositors, but remaining unpaid etc. Thus, the contention of the Department that insurance premium is paid only on the deposits of the customers cannot also be accepted. 56. It has also been submitted by learned Counsel appearing for the banks that even if it is assumed that some part of the deposit is not used for providing "output service", then too the banks are still entitled for the credit availed on the....
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....ENVAT credit of service tax paid on re- insurance services by treating the said service as an "input service". PNB Metlife India Insurance Company was carrying on life insurance business and on the insurance policy issued by it, service tax was charged from the customers. It also procured re-insurance service from overseas insurance companies and availed CENVAT credit of service tax paid on such services received by it. This CENVAT credit was denied by the Department for the reason that re-insurance service cannot be considered as an "input service" since it takes place after the insurance policy is issued. The Karnataka High Court examined whether CENVAT credit availed and utilized by the insurance company on service tax paid for re-insurance service is an "input service" for the output service of insurance that the company was providing and held that the process of issuance of the policy by the insurer and subsequent procurement of re-insurance policy from another company, which is a statutory requirement, is an integral part of the entire process and the insurance process does not come to end merely on the issuance of the insurance policy since it continues till the existence of....
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....t) dismissed the appeal filed by Revenue and upheld the decision of the Tribunal in South Indian Bank (supra). Nothing has been brought to our notice to show that any appeal has been filed by the Revenue against the aforesaid decision of Hon'ble Kerala High Court, therefore, it attained attained finality. 12. Similarly, Hon'ble High Court judicature at Bombay, in two appeals viz. Central Excise Appeal No.21 of 2021 in the matter of the Commissioner of CGST & Central Excise vs. Yes Bank Ltd and Central Excise Appeal No.20/2021 in the matter of the Commissioner of CGST & Central Excise. Mumbai vs. IndusInd Bank Ltd. vide its order dated 12.09.2023 dismissed the appeals of Department on identical issue while observing that the issue is not different which has fell for consideration of the Larger Bench of the Tribunal in South Indian Bank (supra). Hon'ble High Court also observed that they are in agreement with the view taken by the Hon'ble Division bench of Kerala High Court in approving the decision of Larger Bench of the Tribunal and that the Revenue is unable to urge any contention as to why the decision of Hon'ble Kerala High Court accepting the decision of the Larger Bench of ....