The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has granted Axis Bank CENVAT Credit on taxes paid on premiums that are necessary for banks to operate.
M/s Axis Bank Ltd is in appeal against denial of CENVAT credit of Rs. 59,68,88,683, availed by them between June 2012 and December 2013, on tax arising on premium charged by Deposit Insurance and Credit Guarantee Corporation (DICGC), that was sought to be recovered under section 73 of Finance Act, 1974, attended upon with appropriate interest under section 75 of Finance Act, 1994, while imposing penalty of like amount under rule 14 of CENVAT Credit Rules, 2004 in order of Commissioner of Service Tax.
Become a PF & ESIC expert with our comprehensive course – Enroll Now
After the dispute over the taxability of the premium paid by all banks under the Reserve Bank of India’s (RBI) mandate for insurance coverage of small deposits in the event of bank failure was resolved, the beneficiary banks utilized the tax imposed on premiums under the Finance Act of 1994, which was the subject of multiple disputes before the Tribunal. This appeal’s sole concern is whether or not banks operating under the Reserve Bank of India’s supervision are eligible to get the CENVAT credit for taxes paid on premiums.
The Reserve Bank of India (RBI) oversees banks, and the bench of C J Mathew (Technical Member) and Ajay Sharma (Judicial Member) has noted that CENVAT credit is available on tax paid on premiums that are mandatory for banks to operate. In accepting the appeal, the tribunal found that the insurance service provided to banks by the Deposit Insurance Corporation is a “input service” and that banks are permitted to use the Cenvat credit of service tax they have paid for this service to provide “output services.”
The Tribunal held that the eligibility for CENVAT credit of tax paid on such premium is beyond any controversy and set aside the impugned order.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
