The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the excise dept cannot make the computation of tax liability afresh since past liability on Deposit Insurance and Credit Guarantee Corporation, Mumbai (DICGC), was clarified by Central Board Of Indirect Taxes & Customs(CBIC) notification.
DICGC, the appellant challenged the order passed by the Commissioner of Central Excise (Appeals) The assessee is a subsidiary of the Reserve Bank of India (RBI), which was established under the Deposit Insurance Credit Guarantee Corporation of India Act, 1961 to ensurethe safety of deposits held in commercial banks, cooperative banks, Regional Rural Banks etc., by providing insurance of deposits and guaranteeing credit facilities.
DICGC insures all bank deposits, savings, fixed, current and recurring deposits up to the prescribed limit per deposit in a bank. DICGC pay service tax on the premium collected from the insured banks for insuring such deposits. For this purpose, DICGC is registered with the jurisdictional Service Tax Commissionerate vide registration No. AAACD2094ESD001, under the category of ‘general insurance business’ service under section 69 of the Finance Act, 1994.
The assessee after taking service tax registration on 28.03.2012 filed their first ST-3 return online on 25.04.2012 for the period from October 2011 to March 2012. It was found that DICGC had failed to pay appropriate service tax and also failed to pay interest on delayed payment of service tax resulting in the issuance of show cause notice proceedings.
It was observed that the legal provisions governing service tax provide for defining the ‘taxable service’ under Section 65(105)/65B(44), levy of service tax under the charging section 66/66B, payment of service tax under section 68, exemption from payment of service tax either generallyor subject to such conditions as may be specified or by a special order under section 93.
It was found that thelegal provisionsprovide for handling the non-levy or for not charging service tax for the past period before 20.09.2011, in a specific manner as discussed above.
It was evident that the demand of service tax for the past period before 20.09.2011, by way of show cause notice proceedings initiated by the department has been set aside by the earlier order of this Tribunal dated 11.03.2015 based on the Clarification Notification issued by CBIC.
There is no ground for interfering with the impugned order-in-appeal of the Commissioner of Central Excise (Appeals), LTU, Mumbai ordering that the deposit insurance premium amount collected by the appellants DICGC has to be necessarily considered as inclusive of the service tax element.
The Tribunal held in the earlier order that the service tax demand for the period before 20.09.2011was set aside given the clarification given by the CBIC vide letter dated24.02.2009 stating that the said service is not taxable, which was withdrawn vide letter dated 20.09.2011.It was clarified by the CBIC vide letter No.354/164/2008-TRU dated 24.02.2009 that DICGC is not taxable under the taxable service of ‘general insurance business’.
A two-memberpanel comprising Mr S K Mohanty,(Judicial) and Mr M M Parthiban, (Technical) observed that the show cause notice proceedings were not concluded and thus there were no confirmed demands as on the date of passing the orders-in-original by the concerned Assistant/Deputy Commissioner, to consider these amount of refunds sanctioned to appellants DICGC to be adjusted as arrears for recovery under Section 87 of the Finance Act, 1994.
The CESTAT remanded the issue for redetermination of the actual amount of refunds payable to the appellants DICGC which are more than the service tax that is required to be paid as per law, after duly determining the service tax due to be paid to the Government by the appellants DICGC and the amount of interest payable due to delay in payment of such service tax.
Further held that “the first appellate authority shall verify the various claims of the appellants DICGC, with documentary proof that may be submitted by the appellants DICGC, and give due allowance to the same if found otherwise in order as per law while computing the interest for delay in payment of service tax liability. “
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