Whether the credit availed by bank on service tax paid for insuring deposits, eligible for CENVAT Credit or not? CESTAT answers

Customs, Excise and Services Tax Appellate Tribunal

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The coram of Sulekha Beevi C.S. (Judicial Member) and P. Anjani Kumar (Technical Member) allowed an appeal which was filed aggrieved by the order of the original authority confirming the demand interest and imposed penalty, including a separate penalty on the Former Chief Financial Officer of Indian Overseas Bank. 


Appellant-bank allegedly  had wrongly availed CENVAT Credit in respect of the Service Tax paid on deposit insurance service provided by Deposit Insurance and Credit Guarantee Corporation (hereinafter referred to as ‘DICGC’), investigation was initiated by the Kochi Regional Unit of the Directorate General of Central Excise Intelligence (DGCEI). Scrutiny of documents and statements recorded indicated that the credit availed on the Service Tax paid on deposit insurance service was ineligible. Show Cause Notice was issued proposing to disallow the wrongly availed credit and also to recover the same along with interest and also for imposing penalty.  


Counsel of the appellants submitted that the question involved was whether the appellant-bank can avail credit of the Service Tax on the deposit insurance service provided by DICGC. As per Section 15 of the DICGC Act, every insured bank has to pay premium at the rate notified by them. That the appellant has paid Service Tax on the basis of the premium / fees paid by them to DICGC to insure the deposits. That this is an input service for the appellant-bank and the appellant has correctly availed credit of the Service Tax paid to DICGC. 


The Tribunal followed the decision in South Indian Bank Ltd. v. CCE, 2020 SCC OnLine CESTAT 2395 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. 

The Tribunal while allowing the appeal held that the credit of the Service Tax paid on the basis of premium paid to DICGC is eligible for Cenvat Credit. 


[Indian Overseas Bank v. Commr. of CE&ST, Service Tax Appeal No. 40702 of 2016, decided on June 10, 2022] 

Ms Shwetha Vasudevan, Advocate for the Appellant 

Ms K. Komathi, Authorized Representative for the Respondent 

*Suchita Shukla, Editorial Assistant has reported this brief.

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