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2024 (4) TMI 1149 - AT - Service TaxDivision Bench of the Tribunal in disagreement with the decision of the Larger Bench - reference of matter to the President of the Tribunal for constituting a Larger Bench of five Members of the Tribunal to answer the issues indicated by the Division Bench (in disagreement) in the reference order - requirement to reconsider the decision of the Larger Bench of the Tribunal of three Members in South Indian Bank by a Larger Bench of five Members - fate of the reference when the decision of the Larger Bench of the Tribunal in M/S. SOUTH INDIAN BANK VERSUS THE COMMISSIONER OF CUSTOMS CENTRAL EXCISE AND SERVICE TAX-CALICUT 2020 (6) TMI 278 - CESTAT BANGALORE - LB the correctness of which was doubted by the Di vision Bench has been upheld by the Kerala High Court and the Bombay High Court. Whether the Division Bench could refer the decision of three Members to a Larger Bench of five Members? - HELD THAT - It transpires from a perusal of the reference order of the Division Bench that though the judgment of the Supreme Court of two Hon ble Judges in UNION OF INDIA VERSUS PARAS LAMINATES (P) LTD. 1990 (8) TMI 140 - SUPREME COURT and of the Larger Bench of the Tribunal in COMMISSIONER OF C. EX. VADODARA VERSUS ASIA BROWN BOVERI LTD. 2000 (7) TMI 110 - CEGAT NEW DELHI were considered by the Division Bench but the subsequent Constitution Bench judgments of the Supreme Court rendered by five Hon ble Judges in BHARAT PETROLEUM CORPORATION LTD. VERSUS MUMBAI SHRAMIK SANGHA AND OTHERS 2001 (4) TMI 81 - SC ORDER ; Pradip Chandra Parija and others vs. PRADIP CHANDRA PARIJA AND OTHERS VERSUS PRAMOD CHANDRA PATNAIK AND OTHERS 2001 (12) TMI 71 - SUPREME COURT (LB) ; UNION OF INDIA VERSUS HANSOLI DEVI AND OTHERS 2002 (9) TMI 799 - SUPREME COURT respectively were not considered by the Division Bench of the Tribunal. It clearly follows from the aforesaid three Constitution Bench judgments of the Supreme Court each rendered by five Hon ble Judges that judicial discipline and propriety demands that a Bench of two Members of the Tribunal should follow the decision of a Bench of three Members of the Tribunal but if a Bench of two Members concludes that the earlier decision of three Members is so very incorrect that under no circumstances it can be followed the proper course for the Bench of two Members to adopt is to refer the matter to a Bench of three Members and it is only when a Bench of three Members of the Tribunal also comes to a conclusion that the earlier decision of the Bench of three Members is incorrect that a reference by three Members to a Bench of five Members would be justified - The Division Bench of the Tribunal could not have ignored the three binding Constitution Bench judgments of the Supreme Court in Bharat Petroleum Corporation Pradip Chandra Parija and Hansoli Devi each delivered after the judgment of the Supreme Court in Paras Laminates and the decision of the Larger Bench of the Tribunal in Asia Brown Boveri. The procedure adopted by the Division Bench is in the teeth of the procedure laid down by the aforesaid three constitution Bench judgments of the Supreme Court and is also not in conformity with the procedure that was followed by the Supreme Court in COMMISSIONER OF CUSTOMS (IMPORT) MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY ORS. 2018 (7) TMI 1826 - SUPREME COURT on which reliance was placed by the Division Bench in the reference order. Whether there is a requirement to refer the decision of the Larger Bench of the Tribunal of three Members in South Indian Bank to a Larger Bench of five Members? - HELD THAT - The issue involved in all these appeals is whether the banks can avail credit of this service tax paid by the banks for the service provided to them by the Deposit Insurance Corporation - It transpires from the reference order of the Division Bench that basically the same views have been expressed by the Division Bench as were earlier expressed by the Division Bench in ICICI BANK LIMITED VERSUS COMMISSIONER GST CX BHIWANDI 2020 (11) TMI 843 - BOMBAY HIGH COURT but the Larger Bench did not agree with these views. The reference order also seeks to place heavy reliance upon the judgment of the Supreme Court in Dilip Kumar for coming to the conclusion that the decision of the Larger Bench of three Members of the Tribunal requires re-consideration by a Larger Bench of five Members of the Tribunal. It has therefore to be examined whether the judgment of the Supreme Court in Dilip Kumar would have any application to the facts of the present appeals - It needs to be noted and it is also clear from paragraph 1 of the judgment of the Supreme Court in Dilip Kumar that the Constitution Bench was set up to decide what interpretative rule should be applied while interpreting a tax exemption provision or a notification when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied. Paragraph 28 points out the core issue that was required to be examined and paragraph 41 answers the core issue. The Bench held that every taxing statute including charging computation and exemption clause at the threshold stage should be interpreted strictly but in case of ambiguity in a charging provision the benefit must necessarily go in favour of the assessee. The reference order of the Division Bench also observes that the judgment of the Karnataka High Court in THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX CUSTOMS BANGALORE (ADJUDICATION) THE COMMISSIONER OF SERVICE TAX VERSUS M/S. PNB METLIFE INDIA INSURANCE CO. LTD. 2015 (5) TMI 68 - KARNATAKA HIGH COURT which has a direct bearing on the issue involved in these appeals would be of no benefit to the appellants since it was delivered prior to the judgment of the Supreme Court in Dilip Kumar - The Karnataka High Court in paragraphs 6 and 7 of the judgment rendered in PNB Metlife Insurance had explained that CENVAT credit is given to avoid double taxation and so if the credit of service tax collected by the insurer while selling insurance policy is not given while procuring a policy of re-insurance mandatorily required in law the same would be against the ethos of CENVAT credit policy as the same would amount to double taxation - The decision of the Karnataka High Court in PNB Metlife Insurance could not have been ignored by the Division Bench. There is therefore no good reason to hold that the decision of the Larger Bench of the Tribunal in South Indian Bank requires reconsideration by a Larger Bench of five Members of the Tribunal. Fate of the reference when the decision of the Larger Bench in South Indian Bank has been upheld by the Kerala High Court and the Bombay High Court - HELD THAT - The Bombay High Court in THE PRINCIPAL COMMISSIONER OF CGST AND CENTRAL EXCISE MUMBAI EAST COMMISSIONERATE VERSUS ICICI BANK LTD. 2023 (7) TMI 109 - BOMBAY HIGH COURT BANK OF MAHARASHTRA BANK OF BARODA (FORMERLY KNOWN AS DENA BANK) BANK OF BARODA UNION BANK OF INDIA STATE BANK OF INDIA VERSUS COMMISSIONER CGST CX PUNE-II COMMISSIONER OF SERVICE TAX-I AND IV MUMBAI COMMISSIONER OF CENTRAL EXCISE 2020 (10) TMI 300 - BOMBAY HIGH COURT while examining the same issue as to whether banks can avail CENVAT credit on the insurance services provided by the Deposit Insurance Corporation to the banks set aside the order passed by the department and remanded the matter to the Tribunal for a fresh consideration and passing of an order in confirmity with the order of the Larger Bench in South Indian Bank. Thus it has to be held that the Division Bench of the Tribunal was not justified in itself framing three questions to be referred to a Larger Bench of five Members of the Tribunal after disagreeing with the views expressed by the Larger Bench of the Tribunal of three Members in South Indian Bank. The Larger Bench decision of the Tribunal of three Members in South Indian Bank does not require re-consideration by a Bench of five Members of the Tribunal. In any view of the matter there is no requirement of referring the matter to a Larger Bench of five Members of the Tribunal as the decision of the Larger Bench of the Tribunal in South Indian Bank has been upheld by the Kerala High Court and the Bombay High Court. The papers may now be placed before the Division Bench for deciding the appeals.
Issues Involved:
1. Whether the Division Bench of the Tribunal could refer the decision of three Members to a Larger Bench of five Members. 2. Whether the decision of the Larger Bench of the Tribunal of three Members in South Indian Bank requires reconsideration by a Larger Bench of five Members. 3. The fate of the reference when the decision of the Larger Bench in South Indian Bank has been upheld by the Kerala High Court and the Bombay High Court. Detailed Analysis: (i) Whether the Division Bench could refer the decision of three Members to a Larger Bench of five Members: The Division Bench of the Tribunal expressed its inability to agree with the decision of the Larger Bench of three Members in South Indian Bank and referred the matter to the President for constituting a Larger Bench of five Members. However, the President of the Tribunal, guided by the Supreme Court's Constitution Bench judgments in Bharat Petroleum Corporation, Pradip Chandra Parija, and Hansoli Devi, held that judicial discipline and propriety demand that a Bench of two Members should follow the decision of a Bench of three Members. If the two Members find the decision of three Members incorrect, they should refer the matter to a Bench of three Members. Only if this Bench also finds the earlier decision incorrect, can a reference to a Bench of five Members be justified. Consequently, the President referred the matter to a Bench of three Members to decide whether the decision in South Indian Bank was incorrect and required a reference to a Bench of five Members. (ii) Whether the decision of the Larger Bench of the Tribunal of three Members in South Indian Bank requires reconsideration by a Larger Bench of five Members: The Larger Bench of the Tribunal in South Indian Bank had concluded that the insurance service provided by the Deposit Insurance Corporation to the banks is an "input service" and CENVAT credit of service tax paid for this service can be availed by the banks for rendering "output services." The Division Bench, however, expressed its inability to agree with this decision, citing the Supreme Court's judgment in Dilip Kumar, which mandates strict interpretation of fiscal statutes. However, the Larger Bench found that the judgment in Dilip Kumar was not relevant to the issue at hand. The Tribunal in South Indian Bank had thoroughly examined the relevant statutes and concluded that the insurance service is an input service necessary for providing output services. The Division Bench's reliance on Dilip Kumar was misplaced as it pertains to exemption notifications, not the interpretation of input services under the CENVAT Rules. Thus, there was no need for reconsideration by a Larger Bench of five Members. (iii) Fate of the reference when the decision of the Larger Bench in South Indian Bank has been upheld by the Kerala High Court and the Bombay High Court: The decision of the Larger Bench in South Indian Bank was upheld by both the Kerala High Court and the Bombay High Court. The Kerala High Court agreed with the Larger Bench's conclusion that the insurance service provided by the Deposit Insurance Corporation is an input service, and CENVAT credit can be availed for this service. The Bombay High Court also concurred with this view and dismissed the appeals filed by the department. Given these high court validations, there was no requirement for further reconsideration by a Larger Bench of five Members. The decisions of the Kerala and Bombay High Courts reinforce the correctness of the Larger Bench's decision in South Indian Bank, making any further reference unnecessary. Conclusion: The Division Bench of the Tribunal was not justified in referring the matter to a Larger Bench of five Members. The decision of the Larger Bench of three Members in South Indian Bank does not require reconsideration by a Larger Bench of five Members. The decision has been upheld by the Kerala High Court and the Bombay High Court, eliminating the need for further reference. The papers may now be placed before the Division Bench for deciding the appeals.
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