Principal Commissioner of Service Tax Vs Allahabad Bank (CESTAT Kolkata)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata dismissed the Revenue’s appeal and upheld the adjudicating authority’s order dropping the demand for reversal of CENVAT credit availed by the respondent on deposit insurance services provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The dispute arose after an investigation by the DGCEI, Kochi Regional Unit, based on intelligence that the respondent had wrongly availed CENVAT credit of Service Tax paid on deposit insurance services provided by DICGC. According to the Revenue, the deposit insurance premium was linked only to deposits accepted by the bank and had no nexus with any output service rendered by the respondent. It was also alleged that the respondent could not charge depositors any fee for insuring their deposits and that payment of the insurance premium was merely a transaction in money. On this basis, the Revenue contended that the deposit insurance service did not qualify as an input service under Rule 2(l) of the CENVAT Credit Rules, 2004.
The Revenue further alleged that the respondent had availed CENVAT credit of Rs. 19,86,29,413/- on three invoices issued by DICGC and that the credit had been taken before the dates of issuance of the invoices dated 11.04.2012, 20.09.2012 and 06.12.2012. Consequently, a show cause notice was issued demanding recovery of the credit along with applicable interest and proposing penalty under the Finance Act, 1994 and the CENVAT Credit Rules, 2004. However, the adjudicating authority dropped the demand, leading the Revenue to file the present appeal.
