Commissioner of Central Excise And Service Tax Vs Corporation Bank (Karnataka High Court)
In Commissioner of Central Excise And Service Tax Vs Corporation Bank, the Karnataka High Court dismissed multiple appeals filed by the Revenue concerning the eligibility of banks to avail CENVAT credit on service tax paid towards deposit insurance premium to the Deposit Insurance and Credit Guarantee Corporation (DICGC). The Court held that the issues raised were already settled by earlier judgments of the Kerala High Court and the Bombay High Court.
The appeals raised common questions of law relating to whether banks could claim CENVAT credit on service tax paid for deposit insurance services received from DICGC. The Revenue questioned the correctness of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in holding that banks were entitled to treat deposit insurance services as “input services” under the Finance Act, 1994. The Revenue also challenged the Tribunal’s reliance on the Larger Bench decision in South Indian Bank vs. Commissioner of Customs, Central Excise & Service Tax, Calicut.
Additional questions raised by the Revenue included whether banking transactions involving “transactions in money only” could be treated as services under the Finance Act, whether such banking activities constituted output services, and whether deposit insurance services could qualify as input services when no separate service charges were collected for such transactions. The Revenue further questioned whether mandatory deposit insurance could be equated with reinsurance services and argued that CENVAT credit should not have been allowed after the omission of the phrase “activities relating to business” from the definition of input services through Notification No. 3/2011 dated 01.04.2011.
