Karnataka HC Upholds Banks’ CENVAT Credit on DICGC Insurance Premium

The Karnataka High Court has upheld the eligibility of banks to avail CENVAT credit on service tax paid towards Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance premium, holding that the issue is no longer res integrain view of earlier judgments of the Kerala and Bombay High Courts. The bench of Justice S.G. Pandit and Justice K.V. Aravind dismissed multiple appeals filed by the Revenue against several banks including Corporation Bank, State Bank of Mysore, Bank of Baroda, Canara Bank, Syndicate Bank and Karnataka Bank. The department had challenged the common order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bengaluru, which had allowed the banks to claim CENVAT credit of service tax paid on DICGC insurance premiums by treating such services as “input services.” The substantial questions of law framed by the High Court included whether banking transactions involving “transactions in money only” could be treated as services under the Finance Act, 1994, and whether banks could legitimately claim CENVAT credit on deposit insurance services obtained from DICGC. The Revenue further argued that after omission of the phrase “activities relating to business” from the definition of input service through Notification No. 3/2011 dated 01.04.2011, such credit was no longer permissible. Senior counsel appearing for the banks submitted before the Court that the controversy had already been settled by the Larger Bench decision of the CESTAT in South Indian Bank vs Commissioner of Customs, Central Excise & Service Tax, Calicut, which held that DICGC insurance services qualified as input services and that banks were entitled to CENVAT credit on the service tax paid thereon. Buy Now: Excise Duty Judgements E-Compilation – April 2026 It was also pointed out that the Kerala High Court, in Principal Commissioner of Central Tax and Central Excise vs South Indian Bank, had affirmed the Larger Bench ruling and answered the issue in favour of the assessees. Further reliance was placed on the Bombay High Court judgment in Commissioner of CGST and Central Excise vs Yes Bank Ltd., which followed the Kerala High Court’s reasoning. The Revenue contended that the issue was pending before the Supreme Court and argued that reliance placed on the Karnataka High Court’s earlier ruling in PNB MetLife India Insurance Co. Ltd. was misplaced. According to the Revenue, banking activities involving transactions in money did not amount to taxable output services and therefore DICGC insurance could not be considered an input service for availment of CENVAT credit. Rejecting the Revenue’s submissions, the Karnataka High Court observed that the Kerala High Court had undertaken an extensive analysis of the Banking Regulation Act, 1949 and the statutory framework governing grant and continuation of banking licences before affirming the entitlement of banks to claim such credit. The Court further held that the Revenue had failed to demonstrate any reason warranting a departure from the view already taken by the Kerala High Court. It noted that similar questions had also been answered by the Bombay High Court in favour of the assessees. Holding that the controversy already stood settled, the Karnataka High Court observed that the questions raised by the Revenue were “no longer res integra.” The Court ultimately answered all substantial questions of law in favour of the assessees and against the Revenue, thereby dismissing the appeals. Case Details Case Title: Commissioner Of Central Excise And Service Tax Versus M/S Corporation Bank Citation: JURISHOUR-1175-HC-2026(KAR) Case No.: Central Excise Appeal No.9 Of 2022 Date: 23/04/2026 Counsel For Appellant: Aravind V Chavan, Advocate Counsel For Respondent: G. Shivadas, Senior Counsel Click Here To Read Order Read More: Services to Foreign Universities Not ‘Intermediary Services’: Delhi HC Directs GST Refund to Education Consultancy

Karnataka HC Upholds Banks’ CENVAT Credit on DICGC Insurance Premium

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