Deposit insurance activity of DICGC falls within ambit of ‘General Insurance Business’

Deposit Insurance and Credit Guarantee Corporation Vs Commissioner (CESTAT Mumbai)

CESTAT Mumbai held that the deposit insurance activity of Deposit Insurance and Credit Guarantee Corporation, Mumbai (DICGC) falls within the ambit of section 65(105)(d) of the Finance Act, 1994 and is chargeable to Service Tax under “General Insurance Business”.

Facts- The assessee (M/s. Deposit Insurance and Credit Guarantee Corporation i.e DICGC) is a subsidiary of the Reserve Bank of India (RBI), which was established under the Deposit Insurance Credit Guarantee Corporation of India Act, 1961 for the purpose of ensuring the safety of deposits held in commercial banks, cooperative banks, Regional Rural Banks etc., by providing insurance of deposits and guaranteeing credit facilities.

DICGC insures all bank deposits, savings, fixed, current and recurring deposits up to the prescribed limit per deposit in a bank. DICGC pay service tax on the premium collected from the insured banks for insuring such deposits. For this purpose, DICGC is registered with the jurisdictional Service Tax Commissionerate vide registration No. AAACD2094ESD001, under the category of ‘general insurance business’ service u/s. 69 of the Finance Act, 1994.

The assessee after taking service tax registration on 28.03.2012 filed their first ST-3 return online on 25.04.2012 for the period from October 2011 to March 2012. It was found that DICGC had failed to pay appropriate service tax and also failed to pay interest on delayed payment of service tax resulting in the issuance of show cause notice proceedings.

Conclusion- On examination of the provisions of the DICGC Act, 1961, it was clarified by the CBIC vide letter No.354/164/2008-TRU dated 24.02.2009 that DICGC is not taxable under the taxable service of ‘general insurance business’; this view was reiterated by CBIC letter dated 22.04.2009. However, after the re-examination of all the relevant issues, the CBIC by letter dated 20.09.2011 clarified that the deposit insurance activity of DICGC falls within the ambit of section 65(105)(d) of the Finance Act, 1994 and is chargeable to Service Tax under “General Insurance Business”.

Held that appellants DICGC are liable to pay interest therein, in case there is any delay in payment of service tax by the due date as prescribed in the service tax legislation. Thus we find that the appellants DICGC are required to pay service tax on the taxable service of deposit insurance with effect from 20.09.2011.

FULL TEXT OF THE CESTAT MUMBAI ORDER

This appeal has been filed under Section 86 of the Finance Act, 1994 (for short, ‘the said Act’), by M/s. Deposit Insurance and Credit Guarantee Corporation, Mumbai (DICGC), having been aggrieved by the Order-in-Appeal No.SK/128-134/LTU/MUM/2015 dated 11.01.2016 (herein referred to as ‘impugned order’) passed by the Commissioner of Central Excise (Appeals), 29^th Floor, World Trade Centre, Cuff Parade, Mumbai – 400005, Large Tax Payer Unit (LTU), Mumbai as first appellate authority.

2. For the sake of convenience, the appellant M/s. Deposit Insurance and Credit Guarantee Corporation, Mumbai (DICGC), herein shall be referred to as the ‘assessee’ and the respondent Commissioner of Central Excise & Service Tax, Large Tax Payer Unit (LTU), Mumbai herein shall be referred as the “Revenue / department”.

FACTUAL MATRIX:

3.1. The assessee is a subsidiary of Reserve Bank of India (RBI), which was established under the Deposit Insurance Credit Guarantee Corporation of India Act, 1961 for the purpose of ensuring safety of deposits held in commercial banks, cooperative banks, Regional Rural Banks etc., by providing insurance of deposits and guaranteeing credit facilities. DICGC insures all bank deposits, savings, fixed, current and recurring deposits up to the prescribed limit per deposit in a bank. DICGC pay service tax on premium collected from the insured banks for insuring such deposits. For this purpose, DICGC is registered with jurisdictional Service Tax Commissionerate vide registration No. AAACD2094ESD001, under the category of ‘general insurance business’ service under section 69 of the Finance Act, 1994. They are also holders of LTU membership vide No. LTU/MUM/0113.

3.2. The assessee after taking service tax registration on 28.03.2012 filed their first ST-3 return online on 25.04.2012 for the period from October, 2011 to March, 2012. During the scrutiny of ST-3 returns by the Revenue, it was found that DICGC had failed to pay appropriate service tax and also failed to pay interest on delayed payment of service tax resulting in issuance of show cause notice proceedings. Upon confirmation of adjudged demands in the said show cause notice proceedings by original adjudication authorities, the assessee being aggrieved had preferred to file appeals before the Commissioner of Central Excise (Appeals), LTU, Mumbai. Further in respect of refund claims filed by the assessee which were rejected/ sanctioned and appropriated against certain demands, by the original authority, appeals were also preferred by the assessee. Revenue also filed two appeals before the said Commissioner of Central Excise (Appeals), LTU, Mumbai claiming that insurance premium collected is not inclusive of service tax and for recovery of short payment of service tax. In respect of all such five appeals filed by the assessee and two appeals filed by the department, the said Commissioner of Central Excise (Appeals), LTU, Mumbai had passed a common order vide Order-in-Appeal SK/128-134/LTU/MUM/2015 dated 11.01.2016 (impugned order). As the issues in appeal are having reference to various orders in original passed by original authority and are covered under the common order in appeal, these details have been captured in brief as below, for better appreciation of the facts of the case.

Table – 1

Issues in brief which were handled in impugned order, the common Order in Appeal passed No.SK/128-134/LTU/MUM/2015 dated 11.01.2016

Order-in-Original reference	Period	Amount involved in Rs.	Decision of Original Authority /Issue involved	Gist of decision of Commissioner (A)
LTU/MUM/ST/GLT- 5/ANK-33/R/13-14 dt. 30.01.2014 issued on 12.02.2014	April, 2012 to Sept. 2012	26,50,512	Refund of Rs.26,50,512 sanctioned and entire amount appropriated against outstanding arrears of interest	Appropriation of demand before its confirmation held illegal. O-in-O set aside to this extent. Dept.’s appeal rejected. Refunds allowed.
Order-in-Original reference	Period	Amount involved in Rs.	Decision of Original Authority /Issue involved	Gist of decision of Commissioner (A)
LTU/MUM/ST/GLT- 5/ANK-32/R/13-14 dt. 30.01.2014 issued on 12.02.2014	Oct. 2012 to Sept. 2012	18,93,80,153	Refund of Rs. 18,93,80,153 sanctioned and entire amount appropriated against outstanding arrears of interest	Appropriation of demand before its confirmation held illegal. O-in-O set aside to this extent. Dept.’s appeal rejected. Refunds allowed.
LTU/MUM/ST/GLT- 5/ANK-18/R/2014 dt. 01.08.2014 issued on 04.08.2014.	April, 2013 to Sept. 2013	27,17,88,920	Refund of Rs. 27,17,88,920 sanctioned and part amount appropriated for Rs.19,29,66,692 against outstanding arrears of interest	Appropriation of demand during the pendency of stay application before CESTAT held illegal. Interest amount is not appropriated twice, in view of the above two orders having been set aside, as above.
LTU/MUM/ST/GLT- 5/ANK-12/R/2014 dt. 08.07.2014	Inclusion of Service tax in premium	10,99,93,595	Refund claimed, on the basis of premium collected as cum tax value, was rejected	Gross amount of premium is inclusive of Service Tax. Dept. appeal was set aside and Party’s appeal allowed
F. No. LTU/MUM/ CX/DICGC/23/ 2008-Pt.II dt. 14.07.2015	06.11.2012 to 23.08.2012	19,29,66,692	Demand of interest was confirmed by Order-in-Original dt.11.04.2014.	Appeal by party is infructuous.

3.3. While dealing with the issues arising out of the five appeals filed by the party and the two appeals filed by the Revenue, the issues for determination was crystallised by the Commissioner of Central Excise (Appeals), LTU, Mumbai as follows:

“7. I find that the following issues arise for my determination which I propose to take up separately:

(a) Whether the amount of premium collected by DICGC can be considered as inclusive of service tax which is the issue in two appeals filed by the department and one appeal filed by DICGC viz., Appeal No. 04/2014/D, 05/2014/D & 48/2014/P?

(b) Whether the Department is right in the adjusting the refund amount under section 11 of the Central Excise Act, 1944 against the demand of interest for delay in payment of service tax, even when show cause notice demanding such interest has not been adjudicated which is the issue in Appeal No. 17/2014/P & 18/2014/P filed by DICGC?

(c) Whether the due date for payment of service tax for DICGC in the instant case is 6th May and 6th November of each year or 6th June or 6^thDecember of each year, which is the issue in Appeal No. 17/2014/P & 18/2014/P filed by DICGC?

(d) Whether interest to the extent of Rs.19,20,30,665/- was appropriated twice from refund amount sanctioned to DICGC, which is the issue in Appeal No. 77/2015/P?

(e) Whether the Department was right in adjusting amount of interest against the refund amount during the pendency of appeal and stay application in CESTAT against the order confirming the interest, which is the issue in Appeal No. 77/2015/P filed by DICGC?

(f) Whether the department was right in not rectifying the mistake apparent on record under section 74 of the Finance Act, 1994 on the ground that the matter is subjudiced, which is the issue in Appeal No. 105/2015/P filed by DICGC?”

3.4. On the above issues, the Commissioner of Central Excise (Appeals), LTU, Mumbai had conducted the appellate proceedings, and arrived at the conclusions on the aforesaid issues as follows:

“7.4. It is observed from the above position that the premium amount payable to DICGC would be at the rates approved by RBI but shall not exceed 15 paisa for every Rs.100/- of the total amount of deposits in the bank at the end of the specified period. Hence, it is evident that the premium rate prescribed by RBI as payable by banks to DICGC for deposit insurance is the maximum rate but there being no provision to the contrary, DICGC is free to collect any amount at any rate lesser than that prescribed by RBI. It is also observed that since DICGC is precluded from collecting any amount as premium in excess of the rate prescribed by RBI. This also implies that the service tax liability required to be discharged by DICGC on this premium cannot be collected over and above the premium amount. Hence, the premium amount collected has to be necessarily considered as inclusive of the service tax element.

………

8.3. As per the provisions of sub-section (2) of section 73 of the Finance Act, 1994 only after the concerned officer have considered the representation made by noticee on whom show cause notice is served under sub-section (1) of section 73 of the Finance Act, 1994 and determined the amount payable by him, the recovery provisions of Section 87 ibid would come into play. Since no such determination having been done and the proceedings being at the stage of show cause notice which is not concluded, no amount is payable by DICGC to the credit of the Central Government and therefore, the amount of refund sanctioned in Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-32/R/13-14 dt. 12.02.2014 and Order-in-Original No.LTU/MUM/ST/GLT-5/ANK-33/R/13-14 dt. 12.02.2014 could not have been appropriated against such unconfirmed demand.

…..

8.5. Since the appropriation of interest against the amount of refund sanctioned vide impugned orders dated 12.02.2014 are found to be not in conformity with the service tax provisions, the arithmetical correctness of the calculation of interest consequent to determination of the due date for payment of service tax for DICGC, which are issues raised in Appeal No. 17/2014/P & 18/2014/P filed by DICGC are not required to be looked into.

…..

9.1. I find from the copies of Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-32/R/13-14 dated. 12.02.2014 and Order-in-Original-No. LTU/MUM/ST/GLT-5/ANK-33/R/13-14 dated 12.02.2014 submitted by DICGC that an amount of Rs.19,20,30,665/- sanctioned as refund was appropriated against interest of Rs.19,50,40,268/- However, in the foregoing paras while dealing with appeals filed by DICGC against these two Order in Originals dated 12.02.2014, I have held that this appropriation of refund sanctioned against unconfirmed demand of interest is not in conformity with the law and that Section 11 of the Central Excise Act, 1944 cannot be invoked in Service Tax matters. Hence, it cannot be said that the interest amount of Rs.19,20,30,665/- have been appropriated twice.

9.2. Since this appropriation is also made under Section 11 of the Central Excise Act, 1944, for the reasons mentioned in the foregoing paras, the said appropriation also cannot be sustained.

…..

9.4. Since I find merit in the contention of DICGC that the amount of interest confirmed cannot be appropriated during the pendency of stay application in appeal, the impugned Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-18/R/2014 dt. 01.08.2014 to the extent it appropriates an amount of Rs.19,29,66,692/- needs to be set aside.

10. DICGC has also filed Appeal No. 105/2015/P against Letter F. No. LTU/MUM/ CX/DICGC/23/ 2008-Pt.II dt. 14.07.2015 issued by The Assistant Commissioner of Central Excise & Service Tax, Large Tax Payer Unit, Mumbai refusing to initiate action under section 74 of the Finance Act, 1994 on the ground that the matter is subjudiced. DICGC has approached the original authority under section 74 of the Finance Act, 1994 in respect of appropriation of refund sanctioned vide Order- in-Original No. LTU/MUM/ST/GLT-5/ANK-18/R/2014 dated 01.08.2014 towards interest liability. Since such appropriation of refund amount towards interest liability has been found to be erroneous by me in the foregoing paras, this appeal filed by DICGC have been rendered infructuous”.

3.5. On the basis of above conclusions, the Commissioner of Central Excise (Appeals), LTU, Mumbai had passed the following order. Extract of the same is below:

’11. In view of the above findings I order as under:

(a) I reject the appeals filed by the Department against Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-32/R/13-14 dt. 12.02.2014 and Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-33/R/13-14 dt. 12.02.2014.

(b) The appeals filed by DICGC against Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-32/R/13-14 dt. 12.02.2014 and Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-33/R/13-14 dt. 12.02.2014 are allowed and the said orders to the extent it appropriates Rs.26,50,512/- and Rs.18,93,80,153/- towards unconfirmed interest liability are set aside. The amount of refund sanctioned to DICGC in these two Order in Originals shall be paid to them forthwith.

(c) I allow the appeal of DICGC filed against Order- in-Original No. LTU/MUM/ST/GLT-5/ANK-18/R/2014 dated 01.08.2014 to the extent it appropriates an amount of Rs.19,29,66,692/- is set aside. The amount of refund sanctioned to DICGC in this Order in Original shall be paid to them forthwith.

(d) I allow the appeal of DICGC filed by setting aside the Order- in- Original No. LTU/MUM/ST/GLT-5/ANK-12/R/2014 dated 08.07.2014. The amount of Rs.10,99,93,595/- sought as refund shall be paid to them forthwith.

(e) I reject the appeal of DICGC filed against Letter F. No. LTU/MUM/ CX/DICGC/23/ 2008-Pt.II dt. 14.07.2015 issued by The Assistant Commissioner of Central Excise & Service Tax, Large Tax Payer Unit, Mumbai being rendered as infructuous.

(…..)
Commissioner’

APPEALS BEFORE THIS TRIBUNAL :

4.1. Being aggrieved of the impugned order passed by the Commissioner of Central Excise (Appeals), LTU, Mumbai, the assessee had filed the following appeals. The details of these appeals and the gist of the grounds claimed by the assessee are as follows:

Appeal No. ST/85938/2016:

The assessee claims that in the impugned order, the Commissioner of Central Excise (Appeals), LTU, Mumbai, had not given his findings about the quantum of interest payable by the assessee. It is further claimed by them that the point of taxation is the date of issuance of invoice or the date of receipt of payment, whichever is earlier. The assessee had received payments from the banks in April/October, and hence they claim that the point of taxation is May/ November. They had received the entire amount of premium for deposits held as on September 2011, in November 2011 and similarly in respect of premium for deposits held as on March 2012, the premium was received in May, 2012. Accordingly they claimed that the service tax is payable by 6th June, 2011/ 6th December, 2012 in terms of Rule 6(1) of Service Tax Rules, 1994 and thus determination of interest by the department is incorrect. As per the calculations made by assessee, the amount of interest shall be calculated for the period 05.12.2011 to 30.03.2012 and the amount should be Rs.15,37,25,564/- for 115 days; and they contest the calculation by the department for the period 06.11.2011 to 30.03.2012 determining the interest amount for 145 days as Rs.19,38,27,885/- in their letter dated 25.08.2015. Similarly, the assessee claim that the calculation of interest for the period 07.06.2012 to 23.08.2012 for 79 days as should be Rs.8,70,712/- and not for 110 days for the period 06.05.2012 to 23.08.2012 as Rs.12,12,383/-.

Appeal No. ST/85937/2016:

The assessee claims that in the impugned order, as against the appeal made by them that the amount demanded have been adjusted by the department second time against the refund amount sanctioned, the findings given by the Commissioner of Central Excise (Appeals), LTU, Mumbai, is erroneous. On the prayer made by the assessee that the Assistant Commissioner should rectify the defect and grant refund on the above issue of adjustment of the same amount for second time, no findings have been given by the Commissioner of Central Excise (Appeals), LTU, Mumbai.

4.2. Further, the Revenue having its objections against the impugned order, reviewed the impugned order through the Committee of Commissioners and Revenue had also filed the following appeals. The details of these appeals and the gist of the grounds claimed by the Revenue are as follows:

Appeal No. ST/86257/2016:

The Department had filed an appeal against the impugned order claiming that the appellate authority has erroneously held that the gross amount of premium is to be treated as cum-tax since DICGC has not let in any factual basis for this, before the appellant authority during the appeal proceedings. Therefore, the reliance placed by the appellate authority on sub-section (2) of section 67 of the Finance Act, 1994 is misplaced. Accordingly the Department had made a prayer in their appeal for determination of the following:

(a) Whether after taking into consideration, the facts and circumstances as stated in the grounds for appeal memorandum, the said Order-in-Appeal is legal and proper?

(b) Whether the Commissioner of Central Excise (Appeals), LTU, Mumbai, has erred in holding that the service tax liability required to be discharged by DICGC on the premium cannot be collected over and above the premium amount and that the premium amount collected has to be necessarily considered as inclusive of the service tax element?

(c) Whether by an order passed under Section 86 of Chapter V of the Finance Act, 1994, the Hon’ble CESTAT should remand the case to Commissioner of Central Excise (Appeals), Mumbai-I C. Ex and Service Tax, LTU, for reconsideration and to pass such order as deemed fit?

(d) Whether the CESTAT should pass any order as may be appropriate?

Appeal No. ST/86014/2016:

The Department had filed another appeal against the impugned order on similar lines claiming that the first appellate authority has erroneously held that the gross amount of premium is to be treated as cum-tax, since DICGC doesn’t have any unilateral authority to alter the rate of premium. Further, they claimed that to treat it as cum-tax value, it will reduce the premium and to this the assessee requires prior approval of RBI. Therefore, the department claimed that reliance placed by the appellate authority on sub-section (2) of section 67 of the Finance Act, 1994 is misplaced and his findings are erroneous. Accordingly the Department had made a prayer in their appeal for determination of the following:

(a) Whether after taking into consideration, the facts and circumstances as stated in the grounds for appeal memorandum, the said Order-in- Appeal is legal and proper?

(b) Whether the Commissioner of Central Excise (Appeals), LTU, Mumbai, has erred in holding that the service tax liability required to be discharged by DICGC on the premium cannot be collected over and above the premium amount?

(c) Whether by an order passed under Section 86 of Chapter V of the Finance Act, 1994, Hon’ble CESTAT should remand the case to Commissioner of Central Excise (Appeals), Mumbai-I C. Ex and Service Tax, LTU, for reconsideration and to pass such order as deemed fit?

(d) Whether the CESTAT should pass any order as may be appropriate?

4.3. The Chartered Accountant representing the assessee explained their stand on various grounds during the hearing before this Tribunal in detail besides providing detailed written submissions on the various appeals as follows:

(i) the assessee had addressed to the Assistant / Deputy Commissioner of Central Excise that the adjustment of refund against the demand of Rs.19,29,66,692/- for the second time in Order-in-Original dated 01.08.2014 is a mistake apparent from the records, and hence sought for a direction from the first appellate authority. However, the Commissioner of Central Excise (Appeals), LTU, Mumbai in his order rejected the appeal of the assessee on the ground that he had already held that the adjustment of interest amount demanded against refund sanctioned is erroneous, therefore this appeal of the assessee is infructuous. Hence, the Chartered Accountant representing the assessee prayed that this issue of mistake apparent from the records, should be resolved by directing the concerned authority for refund of the eligible amount to them.

(ii) With reference to the ST-3 returns filed by the assessee for the period October, 2011 – March, 2012 of the financial year 2011-2012, wherein the gross amount for the services rendered have been shown as received in November, 2011 and in respect of ST-3 return for the period April, 2012 – June, 2012 of the financial year 2012-2013, wherein the gross amount for the services rendered have been shown as received in May, 2012, the learned Chartered Accountant for the assessee claimed that the due dates for payment of service tax in their case is 6^thDecember, 2011 and 6^th June, 2012 respectively. Thus they pleaded that the interest for the delayed payment requires to be recalculated as claimed in their appeal.

(iii) the Chartered Accountant for the assessee claimed that the provisions of section 67(2) of the Finance Act, 1994, is squarely applicable in their case. Hence they claimed that the gross amount charged by DICGC is inclusive of service tax. In support of their stand, they relied upon the following judgements:

Commissioner of Central Excise, Delhi Vs. Maruti Udyog Limited [2002 (141) EIT 3 (SC)]

Commissioner of Central Excise and Customs, Patna Vs. Advantage Media Consultant [2008 (10) STR 449 (Tri-Kolkata)]

Sri Chakra Tyres Limited Vs. Collector of Central Excise, Madras [1999 (108) ELT 361 Tribunal]

(iv) The learned Chartered Accountant for the assessee stated that the claim made by the department in their appeal, contrary to the conclusion arrived at in the impugned order that service tax liability cannot be discharged over and above the premium amount collected and the premium amount has to be necessarily considered as inclusion of service tax element in the order passed by the Commissioner of Central Excise (Appeals), LTU, Mumbai, is devoid of merits, vexatious in nature and deserves to be dismissed.

4.4. The learned Authorised Representative for Revenue while reiterating the points as decided in the impugned order to the extent they were acceptable to the department, also explained the grounds on which the department had preferred appeal. The written submission made by the learned AR consisted of the following points, in brief:

(i) the Department is praying for computation of tax liability over and above the amount of premium collected by DICGC as insurance premium

(ii) though it was concluded in the impugned order that the show cause notice proceedings for demand of interest on delayed payment of service tax for Rs.19,17,54,309/- vide notice dated 31.01.2013 and for Rs.12,12,383/- vide notice dated 25.06.2013, could not have been appropriated against unconfirmed demand, these were duly confirmed subsequently as adjudged demands besides imposition of penalty, in the order in original No.01-02/COMMR(WLH)/LTU-M/CX/2014 dated 11.04.2014.

(iii) Since both the parties have made rival claims in the matter for determination of interest on delayed payment of service tax and on the cum-tax value, to serve their respective causes, it was prayed that the matter may be remanded to Commissioner (Appeals), for determination of the issues raised by the Department and the assessee.

5. Heard both sides and perused the records of the case. Issues that require consideration by this Tribunal, in the instant case, are as follows:

(i) Does the deposit insurance premium collected by the appellants DICGC for the disputed period October, 2011 to March, 2012 and April, 2012 to September, 2012, as discussed by the Commissioner of Central Excise (Appeals), LTU, Mumbai, in paragraphs 7 to 7.6 of the impugned order concluding that premium amount collected by DICGC has to be necessarily considered as inclusive of service tax element, require redetermination for the purpose of determination of service tax liability.

(ii) whether the interest payable by the appellants DICGC for the delay in payment of service tax on the due date, require determination in terms of service tax legislation; and whether such amount of interest is required to be redetermined, contrary to the conclusion arrived at in paragraph 8.5 of the impugned order.

(iii) whether the findings made by the Commissioner of Central Excise (Appeals), LTU, Mumbai in the impugned order, in respect of claims made by the appellants DICGC on appropriation of the refunds sanctioned twice, not rectifying the mistake apparent on record, and the claim of the department for computation of tax liability over and above the amount collected by DICGC as insurance premium, are required to be re-determined.

6.1. In order to appreciate the various issues that have arisen in this appeal, it would be pertinent to refer to the background to the dispute on the levy of service tax with respect to the services provided by DICGC in the past and the earlier order passed by this Tribunal in Appeal Nos. ST/86491/2013, ST/88305/2014 and ST/88324/2014 vide Order No. A/559-561/15/STB dated 11.03.2015. The relevant extract for better appreciation of the above case is below:

“2.1. DICGC is a subsidiary of RBI established under the DICGC Act, 1961 for the purpose of providing insurance of deposits and guaranteeing credit facilities. It insures all bank deposits, savings, fixed, current and recurring deposits up to the limit of Rs.1 lakh of each deposit in a Bank. Deposits held by all commercial Banks, including branches of foreign banks functioning in India, Local Area Banks, Regional Rural Banks and all eligible co-operative banks as defined under the DICGC Act,1961 are covered by the Deposit Insurance Scheme.

2.2. The legal framework for DICGC is provided by the DICGC Act, 1961 and the DICGC General Regulations,1961. Pursuant to opting for Large Taxpayer Unit (LTU) membership for tax purposes by DICGC, in the year 2008, the question of coverage of deposit insurance services rendered by DICGC came to be examined by the department. They were asked, vide letter dated 7/7/2008 to take out service tax registration and pay service tax and also furnish information relating to income earned by them from 1/5/2006.

2.3. DICGC sought exemption from service tax by their letter dated 01/08/2008, which was rejected by the Finance Ministry by letter dated 05/01/2009. In the meantime, CBEC, by its letter dated 1/12/2008 confirmed that the services provided by DICGC were covered under General Insurance Businessw.e.f. 01/05/2006. DICGC was reminded to furnish the information sought for from them by letter dated 16/10/2008. However, DICGC did not comply with the request but contested the levy by their letter dated 28/11/2008. Department addressed similar letters to DICGC on 10/12/2008, 1/1/2009 and 29/1/2009.

2.4. DICGC, by their letter dated 14/01/2009, took up the matter with Finance Ministry, who issued a clarification vide letter dated 24/2/2009 to the effect that the charges collected by DICGC are not taxable under the taxable service of General Insurance Service. This view was reiterated by CBEC letter dated 22/4/2009.

2.5. The LTU, Mumbai expressed reservations about the correctness of the above view and after re-examination of all the relevant issues, the CBEC, vide letter dated 20/9/2011 clarified that the insurance activity of DICGC falls within the ambit of section 65(105) (d) of Finance Act,1994 and is chargeable to service tax under general insurance business. DICGC were accordingly addressed letters on 22/9/2011, 5/10/2011 and 10/10/2011.

2.6. DICGC obtained Service Tax registration thereafter and started paying Service Tax w.e.f. the half year ending March 2013. They furnished the information on gross charges recovered up to 31/3/2011 on 13/10/2011 & 19/10/2011.

2.7. Show cause notice demanding Service Tax amounting to Rs.2075.65 Cr. invoking extended period of limitation was issued on 24/10/2011 for the period from 1/5/2006 to 31/3/2011 and demanding Service Tax amounting to Rs.283.15 Cr. was issued on 07/03/2012, for the period from 1/4/2011 to 30/9/2011 within normal time limit. Two more show cause notices were issued for recovery of interest for the belated payment of service tax and for imposition of penalties on 31/01/2013 and 25/06/2013. These notices were adjudicated as indicated in the opening paragraph and the demands confirmed and penalties imposed. Hence the appeals before us.

….

6. To conclude,-

(1) We hold that the deposit insurance activity undertaken by the appellant, Deposit Insurance and Credit Guarantee Corporation, falls within the taxable service category of “general insurance business service” as defined in section 65(49) read with section 65(105)(d) of the Finance Act, 1994 and is liable to service tax accordingly.

(2) The appellant is liable to pay service tax on the said activity for the period from 20/09/2011 onwards along with interest thereon in case there is any delay in payment of tax by the due date. The service tax demand for the period prior to 20/09/2011 is set aside in view of the clarification given by the CBEC vide letter dated 24/02/2009 that the said service is not taxable which was withdrawn vide letter dated 20/09/2011.

(3) The appellant is not eligible for the benefit of tax exemption under notification 22/2006-ST dated 31/05/2006, as amended.

(4) We set aside the penalty imposed on the appellant invoking the powers conferred under Section 80 of the Finance Act, 1994.”

6.2. From the above, we find that the matter regarding levy of service tax on the deposit insurance activity undertaken by the appellant DICGC duly covered under the taxable service category of ‘general insurance business’ service as defined in section 65(49) and that service tax is liable to be paid under Section 65(105)(d) of the Finance Act, 1994 has been settled in favour of the department. Further, the said earlier order of this Tribunal had made it clear that service tax is payable on the said the service provided by the appellant DICGC from 20.09.2011 onwards.

6.3. We also find that in arriving at this decision, this Tribunal had considered the facts of the case on record, and also the fact that various representations made by the appellants to the government vide their letters dated 05.01.2009 and 14.01.2009, and the applicability of service tax to the appellants DICGC was examined by the Central Board of Indirect Taxes and Customs (CBIC). On examination of the provisions of the DICGC Act, 1961, it was clarified by the CBIC vide letter No.354/164/2008-TRU dated 24.02.2009 that DICGC is not taxable under the taxable service of ‘general insurance business’; this view was reiterated by CBIC letter dated 22.04.2009. However, after the re-examination of all the relevant issues, the CBIC by letter dated 20.09.2011 clarified that the deposit insurance activity of DICGC falls within the ambit of section 65(105)(d) of the Finance Act, 1994 and is chargeable to Service Tax under “General Insurance Business”.

6.4. We also find that this Tribunal had clearly held in the above earlier order that the service tax demand for the period prior to 20.09.2011 is set aside in view of the clarification given by the CBIC vide letter dated 24.02.2009 stating that the said service is not taxable, which was withdrawn vide letter dated 20.09.2011.

6.5. Further, the said earlier order of this Tribunal also stated in clear terms that appellants DICGC are liable to pay interest therein, in case there is any delay in payment of service tax by the due date as prescribed in the service tax legislation. Thus we find that the appellants DICGC are required to pay service tax on the taxable service of deposit insurance with effect from 20.09.2011.

Whether the insurance premium should be considered as cum-tax-value

7.1. On the issue of deposit insurance premium collected by the appellants DICGC, whether it should be considered as cum-tax value for the purpose of determination of service tax liability, we find that the matter is no more res integra in view of the various decisions taken by this Tribunal, which were also upheld by the Apex Court. In particular, we find that Kolkata Bench of CESTAT in the case of Commissioner v. Advantage Media Consultant as reported in 2008 (10) S.T.R. 449 (Tri. – Kolkata) has held as follows:

“3. Service tax is an indirect tax. As per this system of taxation, tax borne by the consumer of goods/ services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable. We find that this principle has been legislated in the following terms with effect from 18.04.2006 in Section 67 (2) of the Finance Act, 1994 as amended:

‘67(2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged.’.”

7.2. We also find that the matter was appealed before the Hon’ble Supreme Court by the department, and the Supreme Court Bench comprising Hon’ble Mr. Justice S.H. Kapadia and Hon’ble Mr. Justice B. Sudershan Reddy on 13-10-2008, after condoning the delay dismissed the Civil Appeal No. D 23523 of 2008 filed by Commissioner of Central Excise & Customs, Patna against the CESTAT Final Order Nos. A/355-356/KOL/2008, dated 19-3-2008 in the case of Advantage Media Consultants (supra), While dismissing the appeal, the Supreme Court passed the following order:

‘Delay condoned.

The Civil Appeal is dismissed.’

The Appellate Tribunal in its impugned order had upheld the remand order of Commissioner (Appeals) where cum-tax benefit was directed to be given. The party was rendering Advertising Agency service and Service tax was not collected for services rendered to government agencies. It held that Service tax being an indirect tax, was borne by consumer of goods/services and the same was collected by assessee and remitted to government and total receipts for rendering services should be treated as inclusive of Service tax due to be paid by ultimate customer unless Service tax was paid separately by customer. The Tribunal had noted that cum-tax value has been incorporated in Section 67 of Finance Act, 1994 vide amendments made subsequently.”

7.3. We further find that in a similar matter, in the context of excise duty came up before the Hon’ble Apex Court in the case of Appeal (Civil) 3783 of 2000 in Commissioner of Central Excise, Delhi Vs. Maruti Udyog Limited [2002 (2) SCR 99 dated 27/02/2002] wherein the Hon’ble Supreme Court decided in the judgement dated 27.02.2002, as follows:

Judgement:

2002 (2) SCR 99

The following Orders of the Court was delivered :

The respondent is manufacturing motor vehicles and it had availed of MODVAT credit of the duty paid on inputs under Rule 57A of the Central Excise Rules. As it had not paid any excise duty on the raw material, it became liable to pay excise duty on the waste and scrap of aluminium and iron and steel which scrap had been sold by the respondent.

“The Collector raised a demand of excise duty on the waste and scrap which was sold. The demand was challenged by the respondent who contended that excise duty was not payable. Having been unsuccessful before the Collector, an appeal was filed before the Customs, Excise and Gold (Control) Appellate Tribunal. The Tribunal by the impugned order came to the conclusion that excise duty was payable on the scrap sold by the respondent. It further came to the conclusion that the price on which the waste and scrap had been sold should be considered to be cum-duty price and the assessable value should be determined after deducting the element of excise duty. It is this part of the decision of the Tribunal which is sought to be challenged by the Revenue in this appeal.

The respondent had sold the scrap and according to it the purchaser was not liable to pay any amount in addition thereto and it is for this reason the Tribunal regarded this transaction as being one of cum-duty price.

Section 4 of the Central Excises and Salt Act, 1944 provides for valuation of excisable goods for purposes of charging of duty of excise. Under Section 4(1), the duty of excise is chargeable on any excisable goods with reference to the value which is deemed to be the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade where the buyer is not a related person and the price is the sole consideration for the sale. Section 4(4)(d)(ii) states that value in relation to any excisable goods does not include the amount of duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount, etc., is also to be allowed as a deduction.

A reading of the aforesaid Section clearly indicates that the wholesale price which a charged is deemed to be the value for the purpose of levy of excise duty, but the element of excise duty, sales tax or other taxes which is included in the wholesale price is to be excluded in arriving at the excisable value. This Section has been so construed by this Court in Assistant Collector of Central Excise and Ors. v. Bata India Ltd., [1996] 4 SCC 563, and it is thus clear that when cum-duty price is charged, then in arriving at the excisable value of the goods the element of duty which is payable has to be excluded. The Tribunal has, therefore, rightly prceeded on the basis that the amount realised by the respondent from the sale of scrap has to be regarded as a normal wholesale price and in determining the value on which excise duty is payable the element of excise duty which must be regarded as having been incorporated in the sale price, must be excluded. There is nothing to show that once the demand was raised by the Department, the respondent sought to recover the same from the purchaser of scrap. The facts indicate that after the sale transaction was completed, the purchaser was under no obligation to pay any extra amount to the seller, namely, the respondent. In such a transaction, it is the seller who takes on the obligation of paying all taxes on the goods sold and in such a case the said taxes on the goods sold are to be deducted under Section 4(4)(d)(ii) and this is precisely what has been directed by the Tribunal. There is also nothing to show that the sale price was not cum-duty.

It will be useful here to refer to the observations of this Court in Hindustan Sugar Mills v. State of Rajasthan and Ors., [1978] 4 SCC 271, at page 280, as follows:

“Take for example, excise duty payable by a dealer who is a manufacturer. When he sells goods manufactured by him, he always passes on the excise duty to the purchaser. Ordinarily it is not shown as a separate item in the bill, but it is included in the price charged by him. The ’sale price’ in such a case could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods. True, the excise duty component of the price would not be an addition to the coffers of the dealer, as it would go to re-imburse him in respect of the excise duty already paid by him on the manufacture of the goods. But even so, it would be part of the ’sale price’ because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchase:. There is no other manner of liability, statutory or otherwise, under which the purchaser would be liable to pay the amount of excise duty to the dealer. And, on this reasoning, it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill. In either case, it would be part of the ’sale price’ “

The example given in the aforesaid decision is clearly applicable in the present case. The sale price realised by the respondent has to be regarded as the entire price inclusive of excise duty because it is the respondent who has, by necessary implication, taken on the liability to pay all taxes on the goods sold and has not sought to realise any sum in addition to the price obtained by it from the purchaser. The purchaser was under no obligation to pay any amount in excess of what had already been paid as the price of the scarp.

Under the circumstances, the Tribunal was right in directing that the respondent is entitled to the benefit of Section 4(4)(d)(ii) of the Central Excises & Salt Act.

For the aforesaid reasons, this appeal is dismissed. No costs.”

7.4. We further find from the records of the case, that the plea advanced by the department on the issue of cum-tax-value of premium collected for deposit insurance by the appellants DICGC, that such treatment of gross amount of premium collected by appellants DICGC as ‘inclusive of service tax’ will tantamount to reduction in premium amount which is solely decided by the Reserve Bank of India and the appellants DICGC does not have any unilateral authority to alter the rate of premium to be collected from the insured banks and they have to obtain the prior approval of the RBI, has been found to have been overcome by specific approval of the RBI as follows. We find from the records that the Reserve Bank of India in the proceedings of the meeting of the Committee of the Central Board held on 22nd July, 2015 the following decision has been taken.

“5. The Committee considered Executive Director’s Memorandum dated July 16, 2015 on ‘Need for Specific approval of Reserve Bank of India for treatment of premium inclusive of Service Tax for the period October, 2011 to March, 2013 – Additional Service Tax liability on DICGC’ and passed the following resolution:

RESOVLED

that it was noted that the gross amount charged by DICGC to the insured banks during the period October 01, 2011 to March 31, 2013 was inclusive of service tax payable and as such gross amount was in accordance with the approval given by RBI under Section 15 (1) of the DICGC Act, no further approval was necessary. The submission that the value of taxable service has been calculated by DICGC in accordance with the method indicated by Section 67(2) of the Finance Act, 1994 was also noted”.

7.5. A conjoint perusal of the records, facts of the case with above judicial pronouncements, would lead us to the conclusion that appellants DICGC are eligible for the cum tax benefit. In view of this, we do not find any grounds for interfering with the conclusion arrived at in the impugned order passed by the Commissioner of Central Excise (Appeals), LTU, Mumbai that “premium amount collected has to be necessarily considered as inclusive of the service tax element”.

Whether interest payable by the appellants for the delay in payment of service tax on the due date, require determination in terms of service tax legislation; and whether such amount of interest is required to be redetermined

8.1. We find that the legal provisions on payment of service tax, due date for payment of service tax has been provided in the Finance Act, 1994 and the Rules made there under, as follows:

Extract of Sections 68, 75 of the Finance Act, 1994:

SECTION 68.Payment of service tax. —

(1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66B in such manner and within such period as may be prescribed.

(2) Notwithstanding anything contained in sub-section (1), in respect of such taxable services as may be notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66B and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.

Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.

SECTION 75. Interest on delayed payment of service tax.—

Every person, liable to pay the tax in accordance with the provisions of section 68 or rules made there under, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at such rate not below ten per cent. and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette for the period by which such crediting of the tax or any part thereof is delayed:

Provided that in the case of a person who collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government, on or before the date on which such payment is due, the Central Government may, by notification in the Official Gazette, specify such other rate of interest, as it may deem necessary:

Provided further that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed sixty lakh rupees during any of the financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by three per cent. per annum.

Extract of Service Tax Rules, 1994: 

6. Payment of service tax

(1) The service tax shall be paid to the credit of the Central Government,-

(i) by the 6th day of the month, if the duty is deposited electronically through internet banking; and

(ii) by the 5th day of the month, in any other case,

immediately following the calendar monthin which the service is deemed to be provided as per the rules framed in this regard:

Provided that where the assessee is a one person company whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, or is an individual or proprietary firm or partnership firm or Hindu Undivided Family, the service tax shall be paid to the credit of the Central Government by the 6th day of the month if the duty is deposited electronically through internet banking, or, in any other case, the 5th day of the month, as the case may be, immediately following the quarter in which the service is deemed to be provided as per the rules framed in this regard :

Provided further that the service tax on the service deemed to be provided in the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year.

Provided also that in case of such individuals, partnership firms and one person companies whoseaggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or agreed to be provided by him up to a total of rupees fifty lakhs in the current financial year, by the dates specified in this sub-rule with respect to the month or quarter, as the case may be, in which payment is received.

Provided also that in the case of an assessee in the State of Tamil Nadu State of Tamil Nadu and the Union Territory of Puducherry (except Mahe&Yanam), the service tax payable for the month of November, 2015, shall be paid to the credit of the Central Government by the 20th day of December, 2015.

Provided also that in case of online information and database access or retrieval services provided or agreed to be provided by any person located in a non-taxable territory and received by non-assessee online recipient, the service tax payable for the month of December, 2016 and January, 2017, shall be paid to the credit of the Central Government bythe 6th day of March, 2017.

(1A) Without prejudice to the provisions contained in sub-rule (1), every person liable to pay service tax, may, on his own volition, pay an amount as service tax in advance, to the credit of the Central Government and adjust the amount so paid against the service tax which he is liable to pay for the subsequent period: Provided that the assessee shall,- (i) intimate the details of the amount of service tax paid in advance, to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such payment; and (ii) indicate the details of the advance payment made, and its adjustment, if any in the subsequent return to be filed under section 70 of the Act.

(2) Every assessee shall electronically pay the service tax payable by him, through internet banking:

Provided that the Assistant Commissioner or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction, may for reasons to be recorded in writing, allow the assessee to deposit the service tax by any mode other than internet banking.

(2A) For the purpose of this rule, if the assessee deposits the service tax by cheque, the date of presentation of cheque to the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on whichservice tax has been paid subject to realization of that cheque.

(3) Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason, or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract, the assessee may take the credit of such excess service tax paid by him, if the assessee.- (a) has refunded the payment or part thereof, so received for the service provided to the person from whom it was received; or (b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued. (4)Where an assessee is, for any reason, unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter, as the case may be, he may make a request in writing to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, giving reasons for payment of service tax on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, on receipt of such request, may allow payment of service tax on provisional basis on such value of taxable service as may be specified by him and the provisions of the Central Excise Rules, 2002, relating to provisional assessment, except so far as they relate to execution of bond, shall, so far as may be, apply to such assessment.

(4A)Notwithstanding anything contained in sub-rule (4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.

(4B)The adjustment of excess amount paid, under sub-rule (4A), shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability, valuation or applicability of any exemption notification.

(4C)Notwithstanding anything contained in sub-rules (4), (4A) and (4B), where the person liable to pay service tax in respect of service of renting of immovable property has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, on account of non-availment of deduction of property tax paid in terms of notification No. 29/2012-Service Tax, dated the 20th June, 2012, from the gross amount charged for renting of the immovable property for the said period at the time of payment of service tax, the assessee may adjust such excess amount paid by him against his service tax liability within one year from the date of payment of such property tax and the details of such adjustment shall be intimated to the Superintendent of Central Excise having jurisdiction over the service provider within a period of fifteen days from the date of such adjustment.

(5)Where an assessee under sub-rule (4) requests for a provisional assessment he shall file a statement giving details of the difference between the service tax deposited and the service tax liable to be paid for each month in a memorandum in Form ST-3A accompanying the quarterly or half yearly return, as the case may be

Extract of Point of Taxation Rules, 2011:
3.Determination of point of taxation.-

For the purposes of these rules, unless otherwise provided, ‘point of taxation’ shall be,-

(a) the time when the invoice for the service provided or agreed to be provided is issued:

Provided that where the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules,1994, the point of taxation shall be the date of completion of provision of the service.

(b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment.

Provided that for the purposes of clauses (a) and (b),-

(i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service;

(ii) wherever the provider of taxable service receives a payment up to rupees one thousand in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a).

Explanation .- For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.

8.2. We find from the record, that the appellants DICGC have filed their first ST-3 return online on 25.04.2012 for the period from October, 2011 to March, 2012. We also notice from the ST-3 returns filed by the assessee for the period October, 2011 – March, 2012 of the financial year 2011-2012 filed on 18.07.2012, that the gross amount received as the value of taxable services is shown as Rs.2603,51,60,801/- for the services rendered by the appellants DICGC and it is also shown as the same has been received in November, 2011; and in respect of ST-3 return for the period April, 2012 – June, 2012 of the financial year 2012-2013 filed on 14.12.2012, that the gross amount received as the value of taxable services is shown as Rs.2793,16,30,170/- for the services rendered by the appellants DICGC and it is also shown as the same has been received in May, 2012. The service tax payable for the above two periods have also been shown in the respective ST-3 returns on this basis, the assessee had claimed that the due dates for payment of service tax in the case is 6^th December, 2011 and 6th June, 2012.

8.3. We also find from the records of the case, that apparently there is no difference of views by both the parties, i.e., appellants DICGC and the department, on the issue that the due date for payment of service tax in this case, is the 6th day of the month, immediately following the calendar month in which the deposit insurance premium was received. However, we notice that the appellants have claimed that the Commissioner of Central Excise (Appeals), LTU, Mumbai who decided in his impugned order at para 8.5, that “the issue of arithmetical correctness of the calculation of interest consequent to determination of the due date for payment of Service Tax for DICGC, which are issues raised in Appeal No.17/2014/P and 18/2014/P filed by DICGC are not required to be looked into.” require redetermination as this has arisen from an error in the show cause notice proceedings which have not been addressed in the impugned order. In specific terms, the appellants have stated that error has been caused in the show cause notice dated 31.01.2013 and 25.06.2013 which demanded interest on delayed payment of duty. For the demand of interest during the disputed period October, 2011 to March, 2012, it is claimed by the appellants DICGC that the show cause notice had wrongly captured the due date for payment of service tax as “06.11.2011”, in respect of entire taxable gross premium received in the month of November, 2011 and thus the actual due date for payment of service tax as per Rule 6 of Service Tax Rules, 1994, it will be “06.12.2011”. Hence the calculation of interest for the above delayed payment during the disputed period shall be for 115 days and not for 145 as calculated by the department, and as illustrated by the appellants DICGC, in detail as below:

Table – 2

Calculation of interest under Section 75 of the Finance Act, 1994 for delay in payment of service tax during the period October, 2011 to March, 2012

Sr. No	Particulars	Interest in Rs. as per calculation made by
		Department	Appellants
1	Gross amount received against services provided during October, 2011 to March, 2012	2603,51,60,801	2603,51,60,801
2	Service Tax payable including Cess	2,68,16,21,563	2,68,16,21,563
3	Service Tax actually paid by appellants	2,90,00,00,000	2,90,00,00,000
4	Excess payment made	21,83,78,437	21,83,78,437
5	Interest calculation @18% for 145 days (06.11.2011 to 30.03.2012) November – 2011 – 24 days December, 2011 — 31 days January, 2012 — 31 daysFebruary, 2012 — 29 daysMarch, 2012 — 30 daysTotal –145 days	19, 17,54,309	–
6	Interest calculation @18% for 115 days (06.12.2011 to 30.03.2012) December, 2011 — 25 days January, 2012 — 31 days February, 2012 — 29 days March, 2012 — 30 days Total –115 days	–	15,37,25,564

Similarly, for the demand of interest during the disputed period April, 2012 to June, 2012, it is claimed by the appellants DICGC that the show cause notice had wrongly captured the month in which the taxable amount was received as “April, 2012”, and treated the due date for payment of service tax as “06.05.2012”; whereas the taxable amount was actually received by the appellants DICGC in “May, 2012” and thus the actual due date for payment of service tax as per Rule 6 of Service Tax Rules, 1994, it will be “06.06.2012”. Hence the calculation of interest for the above delayed payment during the disputed period shall be for 79 days and not for 110 as calculated by the department, and as illustrated by the appellants DICGC, in detail as below:

Table – 3

Calculation of interest under Section 75 of the Finance Act, 1994 for delay in payment of service tax during the period April, 2012 to June, 2012

Sr. No	Particulars	Interest in Rs. as per calculation made by
		Department	Appellants
1	Gross amount received against services provided during April, 2012 to June, 2012	2793,16,30,170	2793,16,30,170
2	Service Tax payable including Cess	345,23,49,488	345,23,49,488
3	Service Tax actually paid by appellants	343,00,00,000	343,00,00,000
4	Excess payment made	2,23,49,488	2,23,49,488
5	Interest calculation @18% for 110 days (06.05.2012 to 23.08.2012) May – 2012– 26days June, 2012– 30 days July, 2012 — 31 days August, 2012 — 23 days Total –110 days	12,12,383	–
6	Interest calculation @18% for 79 days (06.06.2012 to 23.08.2012) June, 2012 — 25 days July, 2012 — 31 days August, 2012 — 23 days Total –79 days	–	8,70,712

8.4. On the above issue, we find that the facts of the case have been shown with respect to the ST-3 returns filed by the appellants DICGC and hence there exist reasonable ground for accepting the arguments advanced by the appellants DICGC. However, we donot have any other records such as invoice, receipts, online transactions summary, statement of accounts of the appellants DICGC for establishing the dates on which the payments were made by various banks towards deposit insurance premium that was collected by the appellants as gross amount of taxable services. In order to arrive at a conclusion on the correct date on which the service tax is due to be paid as per the provisions of Rule 6 of Service Tax Rules, 1994, with certainty upon confirmation of the facts, we feel that the matter should go back to the original Appellate Authority i.e., Commissioner of Central Excise (Appeals), LTU, Mumbai.

8.5. Therefore, we are inclined to allow the request of the appellants DICGC as well the request of the department for re-calculation of the interest on delayed payment of service tax taking into account the appellant’s submissions on when the amounts received by them as deposit insurance premium; issue of invoices or any other documents indicating the completion of provision of services rendered by the appellants etc. We thus find that for achieving the above object, the issue needs to go back the first appellate authority for computation of the same.

8.6. During the course of arguments, the Chartered Accountant for the assessee though shown the ST-3 returns in support of their stand, there are many similar documents which needs to be seen for arriving at the correct conclusion on the due date for payment of service tax and the redetermination of interest payable for the delay in payment of service tax. We have neither the mandate nor sufficient data or information to come to a conclusion. Hence, we order that this issue needs to be re-determined by the Commissioner of Central Excise (Appeals), LTU, Mumbai in view of the discussion above.

Whether findings made by the Commissioner of Central Excise (Appeals), LTU, Mumbai in the impugned order, in respect of claims made by the appellants on appropriation of the refunds sanctioned twice, not rectifying the mistake apparent on record, require redetermination by the Commissioner of Central Excise (Appeals), LTU, Mumbai.

9.1. We find that the impugned order-in-appeal was decided by the Commissioner of Central Excise (Appeals), LTU, Mumbai on 11.01.2016 and the said order-in-appeal was against various orders passed by the Assistant/ Deputy Commissioner, two of them on 30.01.2014, another one on 01.08.2014 and the last one on 08.07.2014. In the first two orders dated 30.01.2014, the original authority, while sanctioning the refund of service tax paid, had adjusted the same against the interest on service tax on the ground that these are outstanding arrears for an amount of Rs.18,93,80,153/- and Rs.26,50,512/-. Further vide order dated 01.08.2014 the original authority had also appropriated and adjusted an amount of Rs.19,29,66,692/- against outstanding arrears of interest. We find that the in another Order-in-Original No.01-02/COMMR (WLH)/LTU/M/CX/2014 decided by the Commissioner of Central Excise& Service Tax, LTU, Mumbai on 11.04.2014, wherein the interest for the period 06.11.2011 to 30.03.2012 for an amount of Rs.19,17,54,309/- and for the period 06.05.2012 to 23.08.2012 for an amount of Rs.12,12,383/- was confirmed and ordered to be recovered; precisely against this order the appellants DICGC had filed an appeal before this Tribunal along with stay application, which was then decided on 11.03.2015.

9.2. Accordingly, we find that the conclusion arrived by the first appellate authority in his impugned order that during the pendency of stay applications before this Tribunal, no coercive action can be taken by the department is correct in principle. However, the factual detail in respect of the case whether it was actually pending on that date requires to be examined by the said first appellate authority. Further, we find that he has also rightly held that in terms of the departmental instructions vide CBIC’s Excise Manual at par-III, Chapter 18, in para 1.3, it is stated that if the stay application is filed by an assessee against the Order in Original confirming the duty demand, no coercive action should be taken to realise the dues till the disposal of stay application by the Commissioner (Appeals) or the Appellate Tribunal, as the case may be. However, we find subsequently these vexatious issues have attained finality in terms of the earlier Order passed by the Tribunal on 11.03.2015. Hence, the appellants DICGC should have made an application before the jurisdictional Commissioner who could have re-determined the interest for the actual delay in payment of service tax. Though the first appellate authority rightly held that there is no ground for appropriation of the amount claimed as arrears, in the absence of the its confirmation by the competent authority, which was pending at that time, this could not be done as per the legal provisions. Hence, it was rightly held by him that there was no appropriation of the amount twice.

9.3. However, it is a fact that the appellants DICGC were sanctioned with refund of service tax paid in excess, i.e., over and above the service tax payable on the gross amount of taxable value of services by the Assistant/Deputy Commissioner as elaborated in para 9.1 above. However, against such refunds payable to the appellants DICGC, the department had adjusted the same towards the amount of interest payable on delayed payment of service tax, under the provisions of Section 11 of the Central Excise Act, 1944 as outstanding arrears. Considering the legal position in respect of Section 11 of the Central Excise Act, 1944 providing for recovery of sum due to the Government has not been made specifically applicable to service tax matters under Section 83 of the Finance Act, 1994 and the factual position that the show cause notice proceedings has not been concluded and thus there were no confirmed demands on the date of passing of the order by the concerned Assistant/Deputy Commissioner, even to consider under Section 87 of the Finance Act, 1994, the first appellate authority cannot be found fault with the following findings as determined by him in his order at para 11(a) to 11(d):

(a) “I reject the appeals filed by the Department against Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-32/R/13-14 dt. 12.02.2014 and Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-33/R/13-14 dt. 12.02.2014.

(b) The appeals filed by DICGC against Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-32/R/13-14 dt. 12.02.2014 and Order-in-Original No. LTU/MUM/ST/GLT-5/ANK-33/R/13-14 dt. 12.02.2014 are allowed and the said orders to the extent it appropriates Rs.26,50,512/- and Rs.18,93,80,153/- towards unconfirmed interest liability are set aside. The amount of refund sanctioned to DICGC in these two Order in Originals shall be paid to them forthwith.

(c) I allow the appeal of DICGC filed against Order- in-Original No. LTU/MUM/ST/GLT-5/ANK-18/R/2014 dated 01.08.2014 to the extent it appropriates an amount of Rs.19,29,66,692/- is set aside. The amount of refund sanctioned to DICGC in this Order in Original shall be paid to them forthwith.

(d) I allow the appeal of DICGC filed against Order- in-Original No. LTU/MUM/ST/GLT-5/ANK-12/R/2014 dated 08.07.2014. The amount of Rs.10,99,93,595/- sought as refund shall be paid to them forthwith”.

However, in the light of the appeal filed by the department against the above rejection at (a) above and decision in favour of the appellants DICGC at (b) to (d) above, and taking into account the need for redetermination of the interest on actual delay in payment of service tax, as already decided in the earlier order of the Tribunal dated 11.03.2015, we find that the matter needs to be sent back to the first appellate authority, to determine the actual amounts of refunds of service tax payable to the appellants DICGC.

9.4. Hence, we find that the appellants DICGC may be given liberty to raise any issues before the Commissioner of Central Excise (Appeals), LTU, Mumbai, when the matter is remanded for denovo adjudication. Further, while taking up the matter in denovo proceedings for redetermination of the interest payable for actual delay in payment of service tax, the appellants DICGC shall be given reasonable opportunity of being heard in person and for submission of the relevant documents in support of their claim.

10.1. In respect of the prayer made by the Department for computation of tax liability over and above the amount collected by DICGC as insurance premium, we find that this Tribunal in its earlier order dated 11.03.2015, had specifically stated that “the service tax demand for the period prior to 20/09/2011 is set aside in view of the clarification given by the CBEC vide letter dated 24/02/2009 that the said service is not taxable which was withdrawn vide letter dated 20/09/2011.”. Subsequent to 20.09.2011 onwards, the appellants DICGC have started paying the service tax and had filed the ST-3 returns indicating the value of taxable services, service tax payable and the gross amount charged for October, 2011 to March, 2012 and April, 2022 to June, 2022. Hence, there is no ground for the department for computation of tax liability over and above the deposit insurance premium collected by the appellants DICGC, without challenging the factual details in the ST-3 returns or other documents in support of their claim. Prior to 20.09.2011, the service tax liability on the appellants DICGC in respect of general insurance business, which was demanded by the department vide show cause notice proceedings by invocation of extended period could not be sustained in law and this Tribunal vide its earlier order dated 11.03.2015 had set aside the same.

10.2. In order to answer the logical question and the eagerness of the department in the appeal praying for re-computation of the service tax afresh, we go back to the clarification issued by the department in its letter F. No. 137/135/2008-CX-4 dated 20.09.2011 on the applicability of service tax on the activities carried out by the appellants DICGC. The said letter of CBIC clearly provides in para 8 & 9 as follows:

“8. In view of the above discussion it is clarified that the insurance activity of DICGC falls within the ambit of Section 65(105)(d) of the Finance Act, (FA,1994) and is chargeable to service tax.

9. This clarification may be given wide publicity.”

10.3. We find that this letter was issued by the Director (Service Tax) of CBIC, addressed to the Chief Commissioner, Large Taxpayer Unit, Mumbai. Though this letter takes into account the background of the issue, earlier clarifications offered from the Ministry of Finance, review and modifications for coming to the conclusion that was clarified, it did not specifically provide the same in the form of an order or instructions or directions of CBIC in exercise of the powers vested in Section 37B of Central Excise Act, 1944 made applicable to Service Tax matters vide Section 83 of the Finance Act, 1994. We could only presume at this stage, that such a letter could have been issued by CBIC, directly addressing to the Chief Commissioner, Large Taxpayer Unit, Mumbai, in view of the proviso clause (a) which states that no such orders, instructions or directions shall be issued so as to require any Central Excise Officer to make particular assessment or to dispose of a particular case in a particular manner.

10.4. Further, it is noticed that the services provided by the appellants DICGC for deposit insurance business are as per the provisions of DICGC Act, 1961; and the appellants are solely providing the service of deposit insurance as a subsidiary of RBI, under the role of ‘Deposit Insurer’ as envisaged by the Government under ‘Deposit Insurance Scheme’ which was initially extended to all functioning commercial banks and later extended to co-operative banks, Regional Rural Banks etc. The appellants are registered as Large Taxpayer Unit for both direct and indirect tax purposes in the year 2008. At this juncture, the appellants were asked to take service tax registration and pay service tax vide letter dated 07.07.2008.Thus this clarification could have been issued by the CBIC in the form of letter addressed to the specific authority, i.e., Chief Commissioner, Large Taxpayer Unit, Mumbai, under whom the appellants have taken LTU registration as a tax payer.

10.5. Further, the said letter did not clarify the issue that when the service tax was imposed on general insurance business with effect from 01.07.1994 vide notification No.1/94-ST dated 28.06.1994, what is the status of the tax liability on the insurance activity of the appellants during the period beginning with the introduction of the levy till it was clarified on 20.09.2011.

10.6. In this regard, we also notice that the legal provisions governing service tax provides for defining the ‘taxable service’ under Section 65(105)/65B(44), levy of service tax under the charging section 66/66B, payment of service tax under section 68, exemption from payment of service tax either generally or subject to such conditions as may be specified or by a special order under section 93. We further notice that Central Government is vested with the powers for issue of notification under Section 11C of Central Excise Act, 1944 as made applicable to service tax as per section 86 of the Finance Act, 1994, where if it is satisfied that a practice was, or is, generally prevalent regarding levy of service tax, including non-levy thereof, on any taxable services; and that such taxable services were, or are, liable to service tax, in cases where according to the said practice the service tax was not, or is not being levied, then the Central Government may direct that the whole of the service tax shall not be required to be paid, in respect of such taxable services. Thus we find that the above legal provisions clearly provide for handling the non levy or for not charging service tax for the past period prior to 20.09.2011, in a specific manner as discussed above. We also find that CBIC had issued such notifications in above described scenario. An example of such notification issued by Government is the Notification No. 19/2015 Service Tax dated 14.10.2015, wherein non-levy of service tax on the services provided by an Indian Bank or other entity acting as an agent to the Money Transfer Service Operators (MTSO), in relation to remittance of foreign currency from outside India to India, for the period from 01.07.2012 to 13.10.2014, a specific direction of the Central Government was issued that the said service tax shall not be required to be paid in view of the said practice of non-levy. However, in this case, the CBIC had simply issued the clarification for charging the service tax on the taxable services provided by the appellant forthwith by issue of clarification letter dated 20.09.2011. At this juncture, it could only be persumed that this may be for the reason, that the service provider is a sole and single entity created under the specific enactment i.e., DICGC Act, 1961 and the same is functioning under the jurisdiction of LTU, Mumbai, which is the one single office. Hence, such clarification issued by CBIC to Chief Commissioner, LTU, Mumbai would have been felt sufficient to deal with the issue. We also find that in any case, the demand of service tax for the past period prior to 20.09.2011, by way of show cause notice proceedings initiated by the department has been set aside by the earlier order of this Tribunal dated 11.03.2015. In view of the above discussions on the settled position on past liability of service tax on the appellants DICGC, we abundantly make it clear that there is no ground for the department for computation of tax liability afresh.

11. In view of the above, all the appeals from both the sides of the appellants DICGC and the department are disposed of, in the following manner:

11.1. On the basis of the records, facts of the case and judicial pronouncements on the issue of cum-tax value as discussed above, we order that there is no ground for interfering with the impugned order-in-appeal of the Commissioner of Central Excise (Appeals), LTU, Mumbai ordering that the deposit insurance premium amount collected by the appellants DICGC has to be necessarily considered as inclusive of the service tax element.

11.2 We remand the case to the first appellate authority i.e., the Commissioner of Central Excise (Appeals), C. Excise and Service Tax, LTU, Mumbai-I for the limited purpose of determination of the correct amount of interest that is liable to be paid for the actual delay in payment of service tax due to Government, as per the provisions Sections 68 and 75 of the Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994, and Rule 3 of Point of Taxation Rules, 2011. Needless to state that the first appellate authority should take into account all the details submitted or to be submitted by the appellants DICGC and any other record necessary for the purpose of such re-determination; and also give reasonable opportunity for personal hearing of the appellants DICGC.

11.3. We also uphold the order of the first appellate authority i.e., the Commissioner of Central Excise (Appeals), C. Excise and Service Tax, LTU, Mumbai-I on the basis of the findings that the provisions of Section 11 of the Central Excise Act, 1944 providing for recovery of sum due to the Government has not been made specifically applicable to service tax matters under Section 83 of the Finance Act, 1994 and the fact that the show cause notice proceedings were not concluded and thus there were no confirmed demands as on the date of passing the orders-in-original by the concerned Assistant/Deputy Commissioner, to consider these amount of refunds sanctioned to appellants DICGC to be adjusted as arrears for recovery under Section 87 of the Finance Act, 1994. Thus, we deem it necessary to send back this issue for redetermination of actual amount of refunds payable to the appellants DICGC which are in excess of the service tax that is required to be paid as per law, after duly determining the service tax due to be paid to the Government by the appellants DICGC and the amount of interest payable due to delay in payment of such service tax as elaborated above at para 11.1 and 11.2, respectively.

11.4 We also direct that the first appellate authority i.e., Commissioner of Central Excise (Appeals), Central Excise & Service Tax, LTU, Mumbai-I shall verify the various claims of the appellants DICGC, with documentary proof that may be submitted by the appellants DICGC, and give due allowance to the same, if found otherwise in order as per law, while computing the interest for delay in payment of service tax liability.

11.5. We also direct that the appellants DICGC shall submit necessary documentary proof with reference to the above claims within one month of the receipt of this order and the first appellate authority i.e., Commissioner of Central Excise (Appeals), Central Excise & Service Tax, LTU, Mumbai-I, shall complete the exercise of passing an order on the issues remanded to him, within further period of three months from the date of receipt of the documents from the appellants DICGC.

12. Both the appeals are disposed off in the above terms.

(Pronounced in open court on 28.04.2023)