In a recent ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that the bank can claim Cenvat credit on the service tax paid for deposit insurance premium to the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The issue in this case pertains to the admissibility of cenvat credit of service tax paid by the appellant on deposit insurance premium to ‘Deposit Insurance and Credit Guarantee Corporation’ ( DCIG ).
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According to the department, the appellant had wrongly availed cenvat credit in respect of service tax paid on deposit insurance service provided by ‘Deposit Insurance and Credit Guarantee Corporation’ which does not qualify as ‘input service’ as defined under Rule 2(l) of Cenvat Credit Rules, 2004.
The adjudicating authority confirmed the demand for inadmissible cenvat credit availed by the appellant to the tune of Rs. 20,87,050 ( for the period of May 2014 to June 2015 ) and Rs. 8,75,425 ( for the period 2015-16 ), respectively, along with interest under Section 75 of the Finance Act, 1994, and penalty under Section 67 of the Act.
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The bench noted that the larger bench of the CESTAT in an interim order held that the insurance premium paid to DICGC is an essential part of banking operations.
The CESTAT observed that without this insurance, banks cannot function, as it is mandatory to secure deposits to protect customer interests. The bench held that the insurance service provided by DICGC directly supports the provision of banking services, making it an eligible input service for which Cenvat credit can be claimed.
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The bench comprising Anil G. Shakkarwar ( Judicial Member ) and Ajay Sharma ( Judicial Member ) also relied on several judgements involving South Indian Bank and Bank of America, etc., and set aside the orders of the lower authorities and allowed the appeals filed by the assessee.
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