The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in the case of Citizen Credit Co-Op Bank Vs. Commissioner Of Central Excise & Service Tax, Mumbai West in which it was held that cenvat credit is admissible on service tax paid by the bank on deposit insurance premium to ‘Deposit Insurance and Credit Guarantee Corporation’ (DICGC).
The bench of Ajay Sharma (Judicial Member) and Anil. G. Shakkarwar, (Technical Member) has observed that without payment of insurance premium to DICGC, the Bank will not be able to function or provide any ‘banking and other financial services.’ Therefore payment of insurance premium to DICGC is an integral part of ‘banking and other financial services’ and is an input service for which Cenvat Credit can be availed by the banks.
The Appellant is a Co-operative Bank and is engaged in providing ‘banking and financial services’ and according to the department, they have 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.
Two show cause notices were issued to the appellant demanding inadmissible cenvat credit availed by the appellant alongwith appropriate rate of interest and penalty which got confirmed by the Adjudicating Authority by two separate Orders. On appeals filed by the appellant, Commissioner (Appeals) rejected both the appeals filed by the appellants and upheld the Orders.
The issue raised was in respect of admissibility of cenvat credit of service tax paid by the appellant on deposit insurance premium to ‘Deposit Insurance and Credit Guarantee Corporation’.
The tribunal noted that the registration of the banks with DICGC is not optional but compulsory. All Banks have to obtain a licence from Reserve Bank of India u/s 22 of the Banking Regulation Act without which no bank can function and all of them have also to compulsorily obtain registration with the DICGC in order to protect the interest of depositors.
The tribunal found that The registration can be obtained by the banks only on payment of insurance premium to DICGC. If a Bank fails to pay premium to DICGC, its registration would be cancelled, which ultimately would result in cancellation of licence granted to the Bank by Reserve Bank of India.
The CESTAT allowed the appeal of the bank.
Case Details
Case Title: Citizen Credit Co-Op Bank Vs. Commissioner Of Central Excise & Service Tax, Mumbai West
Case No.: Service Tax Appeal No.88150 Of 2018
Date: 03.12.2024
Counsel For Appellant: Rajeev Dinkar Waglay
Counsel For Respondent: Badhe Piyush Barasu
