Relief to Indian Overseas Bank: CESTAT allows Cenvat Credit of the Service Tax paid on Deposit Insurance Service [Read Order]

In a ruling in favour of M/s Indian Overseas Bank, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai bench has held that cenvat credit is allowable on the Service Tax paid on deposit insurance service provided by Deposit Insurance and Credit Guarantee Corporation (DICGC)

The appellant-bank had wrongly availed CENVAT Credit in respect of the Service Tax paid on deposit insurance service provided by Deposit Insurance and Credit Guarantee Corporation, investigation was initiated by the Kochi Regional Unit of the Directorate General of Central Excise Intelligence (DGCEI). After the proceedings, the department observed that the credit availed on the Service Tax paid on deposit insurance service is ineligible.

A bench of Ms. Sulekha Beevi C.S., Member (Judicial) and Mr. P. Anjani Kumar, Member (Technical) observed that the said issue was considered by the Larger Bench of the Tribunal in the case of M/s. South Indian Bank (supra) wherein it was held that insurance service provided by DICGC to the banks is an input service and the credit of Service Tax is eligible. In the appellant’s own case, the Tribunal, for a different period, has followed the decision of the Larger Bench and held that the credit is eligible.

Concluding the order allowing the plea of the appellant, the Tribunal held that “Following these decisions, we have no hesitation to hold that the credit of the Service Tax paid on the basis of premium paid to DICGC is eligible. The impugned order disallowing the credit and confirming the demand, interest and penalty is set aside.”

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