The court confirmed that deposit insurance services provided by DICGC qualify as 'input services' under CENVAT Credit Rules, allowing banks to avail credit on related service tax, reinforcing established legal precedents.

JUDGMENT :

P. VELMURUGAN, J.

1. These appeals have been filed by the Revenue, praying that the common Final Order No. 40832-40843/2020 dated 29.10.2020, passed by the Customs, Excise & Service Tax Appellate Tribunal, Chennai, be set aside, and that the Orders-in-Original passed by the Adjudicating Authority, which disallowed and recovered the CENVAT credit availed by the respondent-banks on the service tax paid for DICGC premium, be restored, together with interest and penalties.

2. The brief facts leading to the present appeal are that the respondent-banks, all insured institutions under the Deposit Insurance and Credit Guarantee Corporation Act , 1961 (“DICGC Act”), are mandatorily required to register with the DICGC and pay periodic premiums to insure the deposits accepted by them from the public. On such premium, service tax was payable and was in fact paid by the banks. The banks availed CENVAT credit of this service tax on the footing that the service constituted an “input service” under Rule 2(l) of the CENVAT Credit Rules , 2004. Pursuant to intelligence gathered by the DGCEI investigations were initiated and show- cause notices were issued to many banks proposing denial and recovery of this CENVAT credit. In substance, the notices alleged that deposit-insurance is not connected with taxable output services of banks. The adjudicating authority thereafter passed detailed orders confirming the proposals and demanded recovery of the disputed credit, interest and penalty.

3. The Appellate Authority (Commissioner of Appeals) concurred with the findings of the Adjudicating Authority.

4. The Tribunal, while placing reliance on the Larger Bench decision of the CESTAT, Bangalore, in South Indian Bank vs. CC, Kozhikode, (2020) TIOL 861 CESTAT Bang LB, which was also followed in Yes Bank Ltd. vs. CST, Mumbai, (2020) TIOL 1538 CESTAT MUM, held that the insurance service provided by the Deposit Insurance Corporation to the banks constitutes an input service, and that CENVAT credit of service tax paid on such service can be availed by the banks for rendering their output services. In view of this, the Tribunal concluded that nothing survives against the respondent-assessee and the appeals were allowed.

5. Challenging the common order passed by the Tribunal, the Revenue has filed the present appeals.

6. In the grounds of appeals, the following substantial questions of law are raised:-

(i) Whether the insurance service provided by the Deposit Insurance & Credit Guarantee Corporation to the Banks is an 'input service' specifically for the purpose of CENVAT Credit Rules , 2004 ?

(ii) Whether the CENVAT credit can be availed by the Banks in respect of service tax paid for such insurance service received by the Banks from the Deposit Insurance & Credit Guarantee Corporation ?

(iii) Whether the CESTAT is correct in holding that the CENVAT Credit availed by the assessee-Banks as eligible in respect of service tax paid on deposit insurance service provided by DICGC, following the ratio of the judgment in Larger Bench Order of the CESTAT, Bengaluru, on similar facts and circumstances ?

(iv) Whether the CESTAT is correct in setting aside the Order-in-Originals and deciding the matter in favour of assessee-Banks, even when deposit insurance is covered neither by the main part, nor the inclusive part of the definition of input service ?

(v) Whether the CESTAT is correct in setting aside the Order-in-Originals and deciding the matter in favour of the assessee-Banks, even when acceptance of deposits cannot be treated as a 'service', as defined in Section 65(B)(44) of the Finance Act , 1994 as no consideration is charged by the Bank?

(vi) Whether the CESTAT is correct in setting aside the Order-in-Originals and deciding the matter in favour of the assessee-Banks, even when deposit insurance premium is linked only