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TMI Blog2024 (6) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... rative Bank engaged in providing banking and financial services. It availed CENVAT credit on input services, including that on service tax paid by it on deposit insurance premium raised by the Deposit Insurance Corporation. The issue involved is whether the appellant is entitled to avail credit of this service tax. 3. The Deposit Insurance Corporation is a subsidiary of the Reserve Bank of India and has been established under the Deposit Insurance and Credit Guarantee Corporation Act, 1961 for the purpose of insuring deposit and guarantee credit facilities. The Deposit Insurance Corporation transacts business of insuring the 'deposits' accepted by the banks. It has to register every existing 'banking company' as also a 'new banking company' as an insured bank and the insured bank has to pay a premium to the Deposit Insurance Corporation at the rate notified by the Deposit Insurance Corporation. In the event of banking failure/winding up/liquidation of a bank, the Deposit Insurance Corporation protects the deposits of the customers up to a maximum of Rs. 1 lakh per depositor. The banks pay service tax on this premium paid to the Deposit Insurance Corporation and avail CENVAT credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a provider of output service for providing an output service. *****. 54. The contention of the Department is that "accepting" of deposits is covered under Section 66D(n) of the Finance Act which contains the negative list. As noticed above, the negative list comprises, under sub-clause (n) of Section 66D, services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. The issue is whether extending deposits would mean the activity of accepting deposits. The activity of accepting deposits would be an activity where the banks receive deposits from the customers in the form of savings account, recurring deposits, for which the banks pay interest to the customers. On the other hand, the extending of deposits would be an activity of a bank giving its surplus money in the form of deposit to another person, where the consideration received would be in the form of interest. This would be a case where in the course of banking activities, one bank makes a deposit with another bank for which it receives consideration in the form of interest. It is this consideration received by the banks in the form of interest which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat credit availed and utilized by the insurance company on service tax paid for re-insurance service is an "input service" for the output service of insurance that the company was providing and held that the process of issuance of the policy by the insurer and subsequent procurement of re-insurance policy from another company, which is a statutory requirement, is an integral part of the entire process and the insurance process does not come to end merely on the issuance of the insurance policy since it continues till the existence of the term of the policy. The High Court noted that since re-insurance has to be taken under Section 101A of the Insurance Act, it is a statutory obligation and, therefore, has to be considered as having nexus with the "output service" and, therefore, would be an "input service", for which Cenvat credit can be availed. ***** 60. It needs to be noted that the aforesaid decision of the Karnataka High Court in PNB Metlife India has been accepted by the Central Board of Excise and Customs in the Circular dated 16 February, 2018. The relevant paragraphs 8 and 8.1 are reproduced below : "8. Decision of the Hon'ble High Court of Karnataka at Bangalore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT credit of service tax paid by the banks for this service has been availed by the banks for rendering 'output services'." 9. The decision of the Larger Bench of the Tribunal in South Indian Bank has been upheld by the Kerala High Court in The Principal Commissioner of Central Tax & Central Excise, Cochin vs. M/s. South Indian Bank C.E. Appeal No. 1 of 2021 decided on 05.12.2022 and by the Bombay High Court in The Commissioner of CGST & Central Excise, Mumbai Central Commissionerate vs. Yes Bank Ltd. and Indusind Bank Ltd. 2023 (9) TMI 1378 - Bombay High Court. 10. It needs to be noted that Service Tax Appeal No. 20747 of 2015 filed by South Indian Bank was ultimately decided by the Division Bench of the Tribunal on 23.09.2020 on the basis of the order dated 20.03.2020 passed by the Larger Bench answering the reference. The department filed an appeal before the Kerala High Court to assail the order dated 23.09.2020 passed by the Tribunal. The Kerala High Court, after reproducing paragraphs 39 to 64 of the order dated 20.03.2020 of the Larger Bench of the Tribunal in South Indian Bank, observed as follows: "12. We have examined the view from the perspective of questions ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arger bench as follows: ***** 15. The substantial questions raised are not tenable, and the findings recorded by the larger bench have already considered these issues. Two questions argued before this Court are answered against the Revenue and in favour of the assessee. Hence C.E. Appeal No.1 of 2021 is dismissed." (emphasis supplied) 11. It would be seen from the aforesaid judgment of the Kerala High Court that the contentions of the department against the decision of the Larger Bench of the Tribunal were not accepted and the appeal was dismissed holding that the High Court was in full agreement with the views expressed by the Larger Bench of the Tribunal. The Kerala High Court further held that the Larger Bench of the Tribunal, for valid and correct reasons, held 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 received by the banks from the Deposit Insurance Corporation can be availed by the banks for rendering output services. 12. The correctness of the view expressed by the Larger Bench of the Tribunal in South Indian Bank also came up for consideration befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Kerala High Court or has missed its attention on issue of law and which would be relevant in the context of the present proceedings. The revenue also is unable to urge any contention as to why the decision of the Kerala High Court accepting the decision of the Larger Bench of CESTAT ought not to be accepted. 12. In view of the above discussion, we are of the clear opinion that no substantial question of law arises in the present appeals. Both the appeals are accordingly dismissed. No costs." (emphasis supplied) 13. It is seen that the Bombay High Court not only agreed with the view taken by the Kerala High Court in approving the decision of the Larger Bench of the Tribunal in South Indian Bank, but the Bombay High Court also observed that the Revenue could not contend before the High Court that there were still some issues which had not been addressed by the Division Bench of the Kerala High Court and which would be relevant. The Bombay High Court also observed that the Revenue was also not able to urge any contention to substantiate why the decision of the Kerala High Court in accepting the decision of the Larger Bench of the Tribunal should not be accepted. 14. The B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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