Case Details: Commissioner of Service Tax, Central Excise and GST, Trichirappalli vs. Lakshmi Vilas Bank (2026) 39 Centax 376 (Mad.)
Judiciary and Counsel Details
- P. Velmurugan & L. Victoria Gowri, JJ.
- Shri N. Dilip Kumar, Senior Standing Counsel for Customs, CGST and Excise, for the Appellant.
- S/Shri Harish Bindu Madhavan, Krithika Jeganath for M/s. Lakshmi Kumaran & Sridharan Associates, Tanmayee Rajkumar for M/s. King and Patridge, for the Respondent.
Facts of the Case
The respondent-assessee banks, engaged in banking operations, remitted insurance premiums to the Deposit Insurance and Credit Guarantee Corporation for insuring public deposits as required under the statutory framework governing banking institutions. Service tax was paid on such deposit insurance premium, and the banks availed CENVAT credit by treating the said service as an input service under rule 2(l) of the Cenvat Credit Rules, 2004. The department disputed the eligibility of such credit and initiated action for recovery along with penalties, which came to be upheld by the Commissioner (Appeals). On further appeal, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), relying upon a Larger Bench decision on the same issue, allowed the credit claimed by the banks. Aggrieved by the order of the tribunal, the department preferred appeals challenging the admissibility of such credit. The matter was accordingly placed before the Kerala High Court.
High Court Held
The Kerala High Court held that the question regarding the eligibility of CENVAT credit on service tax paid on deposit insurance premium remitted to the Deposit Insurance and Credit Guarantee Corporation was already settled by binding precedent. The Court noted that the Larger Bench of the CESTAT in South Indian Bank v. Commissioner of Customs 2020 (41) G.S.T.L. 609 (Tri.-LB), had held that deposit insurance was a statutory and mandatory requirement for banks and therefore qualified as an input service under rule 2(l) read with rule 3 of the Cenvat Credit Rules, 2004. It was further observed that the said Larger Bench decision had been affirmed by the Kerala High Court in Principal Commissioner of Central Tax & Central Excise v. South Indian Bank Ltd. and Catholic Syrian Bank Ltd (2022) (12) TMI 1479. The Court clarified that mere pendency of a special leave petition before the Supreme Court against the High Court judgment did not dilute the binding nature of the precedent in the absence of any stay. Accordingly, the tribunal had correctly applied the settled legal position and the appeals filed by the department were dismissed.
List of Cases Cited
- South Indian Bank v. Commissioner — 2020 (41) G.S.T.L. 609 (Tri.-LB) — Approved [Paras 4, 8.2, 9.4, 14, 15]
- Yes Bank Ltd. v. Commissioner — (2023) 12 Centax 6 (Tri.-Bom)— Referred [Para 4]
- PNB Metlife India Insurance Co. Ltd. — High Court of Karnataka —Referred [Para 6]
- Shriram Life Insurance Company Ltd. — CESTAT—Referred [Para 6]
- Principal Commissioner v. South Indian Bank Ltd.—(2023) 13 Centax 135 (Ker.)— Followed [Paras 8.2, 11, 15]
- Commissioner v. Yes Bank Ltd. and Indusind Bank Ltd. — (2023) 11 Centax 92 (Bom.)—Noted [Paras 8.3, 16]
