Order Date – 14 July 2023

Parties: Commissioner of CGST & Central Excise Vs Deposit Insurance & Credit Guarantee Corporation

Facts – 

• The Respondent, Deposit Insurance & Credit Guarantee Corporation, a wholly owned subsidiary of Reserve Bank of India, was established as insurer of banks to protect constituents of each bank from ‘run on their money’ for which banks pay a premium.
• Following the audit, an objection raised thereon on value of ‘taxable’ services rendered between October 2011 and March 2013 that liability under Finance Act, 1994 had been improperly discharged by permitting appellant to consider the premium thereof to be inclusive of tax component which was not being separately recovered from client-bank.
• The respondent filed a refund claim on service tax paid under protest. The same was sanctioned by the first appellate authority dated 11th January 2016 holding that the liability under Finance Act, 1994 would be duly discharged upon tax being remitted on the premium considered as inclusive of tax.

Issue – 

• Whether the respondent is entitled to refund?

Order – 

• The Tribunal observed in the absence of exemption, tax liability does lie and, in such circumstances, the tax would have to be borne from the premium itself. Furthermore, as set out in the grounds of appeal, Appellant could not have collected any amount higher than the premium specified by the Reserve Bank of India (RBI) as their customers – the banks also bound under the supervision of the Reserve Bank of India – would not pay up any amount over and above the premium. Consequently, the consideration, and gross value, includes the tax amount and liability was to be computed only on the ‘cum tax’ value.
• The computation of premium is a complicated exercise involving several aspects and factors as well estimation of probability; it is, therefore, not possible to conclusively conclude that inclusion of tax liability would have altered the premium payable for the service.
• A normal commercial transaction cannot be equated with insurance service and the extent to which the premium represents consideration for insurance cover. No evidence has been placed on record by the appellant to demonstrate otherwise.
• Hence the appeal is dismissed.

Case laws on gst