CESTAT Allows CENVAT Credit on Deposit Insurance Premium to Bank

Punjab National Bank Vs Commissioner of Central Excise & Service Tax (CESTAT Chandigarh)

The CESTAT Chandigarh allowed the appeal filed by Punjab National Bank against the order dated 15.02.2018 of the Commissioner (Appeals), Ludhiana, which had upheld the lower authority’s order disallowing CENVAT credit of Rs.35,31,531 availed on insurance premium paid under the Deposit Insurance and Credit Guarantee Corporation Act, 1961. The appellant submitted that the issue stood settled by the Larger Bench decision in M/s South Indian Bank, a Principal Bench decision in the appellant’s own case, and the Chandigarh Bench decision in State Bank of Patiala.

The appellant also contended that the disputed credit had been distributed by its Head Office as an Input Service Distributor (ISD), while no show cause notice had been issued to the ISD. The Tribunal observed that the Larger Bench had held that registration with the Deposit Insurance Corporation and payment of insurance premium are necessary for a bank to render “Banking and Other Financial Services” and that the insurance service received from the Deposit Insurance Corporation constitutes an input service eligible for CENVAT credit. Holding that the issue was squarely covered in favour of the appellant, the Tribunal set aside the impugned order and allowed the appeal, without examining the remaining contentions.

Cases Discussed

• State Bank of Patiala (CESTAT Chandigarh), 2025 (1) TMI 677 (CESTAT Chandigarh)
• M/s South Indian Bank (CESTAT Bangalore Larger Bench), 2020 (6) TMI 278 (CESTAT Bangalore LB)
• Punjab National Bank (CESTAT New Delhi), 2018 (3) TMI 1248-CESTAT New Delhi
• Elder Pharmaceuticals Ltd. (CESTAT Mumbai), 2014 (302) ELT 556 (Tri. Mumbai)
• Castrol India Ltd. (CESTAT Ahmedabad), 2013 (291) ELT 469 (Tri. Ahmd.)
• Godfrey Philips India Ltd. (CESTAT Ahmedabad), 2009 (239) ELT 323 (Tri. Ahmd.)

FULL TEXT OF THE CESTAT CHANDIGARH ORDER

Punjab National Bank, the appellants, challenged the impugned order dated 15.02.2018 passed by Commissioner (Appeals), Ludhiana; learned Commissioner (Appeals) upheld the order dated 30.012.2016 of the lower authority vide which CENVAT credit of Rs.35,31,531/- availed by the appellants on the insurance premium paid by them under the Deposit Insurance and Credit Guarantee Corporation Act, 1961.

2. Learned counsel for the appellants submits that the issue is no longer res integra having been decided by the Larger Bench of the Tribunal in the case of M/s South Indian Bank – 2020 (6) TMI 278 (CESTAT Bangalore LB); Principal Bench has decided the issue in respect of the appellants themselves vide 2018 (3) TMI 1248-CESTAT New Delhi. He also relies on the case of State Bank of Patiala decided by this Bench – 2025 (1) TMI 677 (CESTAT Chandigarh). He also submits that the appellants has availed CENVAT credit on the credit disputed by their Head Office i.e the ISD; Revenue has not issued any show cause notice to the ISD but initiated proceedings to recover the CENVAT credit from the appellants only. He relies on the following cases:

• Elder Pharmaceuticals Ltd. – 2014 (302) ELT 556 (Tri. Mumbai)
• Godfrey Philips India Ltd. – 2009 (239) ELT 323 (Tri. Ahmd.)
• Castrol India Ltd. – 2013 (291) ELT 469 (Tri. Ahmd.)

3. Learned Authorized Representative for the Revenue reiterates the findings of the impugned order.

4. Heard both sides and perused the records of the case. We find that the Larger Bench of the Tribunal came to a conclusion that in order to render any output service under the category of “Banking and Other Financial Services”, it is necessary for a Bank to register itself with the Deposit Insurance Corporation and pay premium after registration. A Bank without obtaining registration and without payment of insurance premium on the deposits outstanding, cannot render any output service of “Banking and Other Financial Services”. The Bench 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.

5. In view of the above, we find that the issue is squarely settled in favour of the appellants and thus, the impugned order cannot be sustained. All other contentions raised by the learned counsel for the appellants have no bearing on the outcome of the case and therefore, do not require to be considered.

6. In the result, the appeal is allowed.

(Operative part of the order pronounced in the open court)