Credit Availed By Indian Overseas Bank On The Service Tax Paid On Deposit Insurance Service Is Eligible For CENVAT Credit: CESTAT

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) consisting of Sulekha Beevi C.S. (Judicial Member) and P. Anjani Kumar (Technical Member) has held that the credit availed by the Indian Overseas Bank on the Service Tax paid on the basis of the premium paid to the Deposit Insurance and Credit Guarantee Corporation (DICGC) for insuring deposits is eligible for CENVAT Credit.

The appellant/assessee, Indian Overseas Bank, had wrongly availed CENVAT Credit in respect of the Service Tax paid on deposit insurance service provided by DICGC. The investigation was initiated by the Kochi Regional Unit of the Directorate General of Central Excise Intelligence (DGCEI). The scrutiny of documents and statements recorded indicated that the credit availed on the Service Tax paid on deposit insurance service was ineligible.

A show cause notice was issued, proposing to disallow the wrongly availed credit. The show cause notice also proposed to recover the credit along with interest and imposed a penalty. After due process of law, the original authority confirmed the demand, imposed interest and imposed penalties, including a separate penalty on the former Chief Financial Officer of M/s. Indian Overseas Bank.

The issue raised was whether the credit availed by the appellant-bank on the service tax paid on the basis of the premium paid to DICGC for insuring deposits was eligible for CENVAT Credit or not.

The appellant-bank contended that DICGC is a subsidiary of the Reserve Bank of India. The DICGC was set up under the Deposit Insurance And Credit Guarantee Corporation Act, 1961 (DICGC Act) to insure deposits and guarantee credit facilities. In the event of a bank failure, or winding up or liquidation of a bank, the DICGC protects bank deposits that are payable to depositors. As per Section 15 of the DICGC Act, every insured bank has to pay a premium at the rate notified by them. The appellant has paid service tax on the basis of the premium or fees paid to DICGC to insure the deposits. It was an input service for the appellant-bank and the appellant has correctly availed credit of the Service Tax paid to DICGC.

The CESTAT held that the credit of the Service Tax paid on the basis of the premium paid to DICGC is eligible. The order denying the credit and confirming the demand, interest, and penalty is set aside.

Case Title: M/s. Indian Overseas Bank Versus The Commissioner of Central Excise & Service Tax

Citation: Service Tax Appeal No. 40702 of 2016

Dated: 10.06.2022

Counsel For Appellant: Advocate Shwetha Vasudevan

Counsel For Respondent: Authorised Representative K. Komathi

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