The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the refund claim of approximately rupees 158 crore to Deposit Insurance and Credit Guarantee Corporations.
Deposit Insurance & Credit Guarantee Corporation, the respondent-assessee as a wholly owned subsidiary of Reserve Bank of India was established as the insurer of banks to protect constituents of each bank from ‘run on their money’ for which banks pay a premium.
The revenue appealed against the allowance of refund claim by the adjudicating authority.
Nitin M Tagade, the counsel for the revenue contended that no factual evidence had been cited by the assessee in proceedings before the lower authorities that the tax had been included in the gross amount collected as premium, that the entire value was liable to tax under section 66 of Finance Act, 1994.
Omprakash Bihari, the counsel for the assessee contended that the liability under Finance Act would be duly discharged upon tax being remitted on the premium considered as inclusive of tax.
Further submitted that the central excise was a duty leviable before any transaction is even contemplated, it would be in the realm of the possible that duty was included in the price paid by the customer while a transaction in services, as destination-based consumption tax, such demonstration was not possible.
Also submitted that the computation of premium was a complicated exercise involving several aspects and factors as well as estimation of probability; it is, therefore, not possible to conclusively conclude that the inclusion of tax liability would have altered the premium payable for the service.
The bench observed that a normal commercial transaction cannot be equated with insurance service and the extent to which the premium represents consideration for insurance coverage.
The two-member bench comprising Ajay Sharma (Judicial) and C.J. Mathew (Technical) allowed the refund claim of approximately Rs.158 crores filed by the assessee and upheld the decision made by the first appellate tribunal while dismissing the appeal filed by the revenue.
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