Error in Short-Levy of Service Tax can be ratified by Assessee either by Suo-Moto or Paying the Tax ascertained before Serving of Notice: Madras HC [Read Judgment]

The Madras High Court has held that in the case of an error in short-levy of service tax, for the purpose of ratifying the assessee is left with 2 options either by suo-moto or by paying the tax ascertained by the Central Excise and Service officer before the serving of notice.

The assessee M/s Bright Marketing Company has appealed to the High court as it is aggrieved by the decision of learned Central, Excise and Service Tax Appellate Tribunal (CESTAT) imposed reduced 25% of penalty on the appellant. It was also submitted that the appellant has already paid the short-levy along with the interest and so the provisions pertaining to recovery of service tax which is not levied or not paid under Section 73(3) and (4) of Finance Act and Section 78 pertaining to the penalty for the failure to pay service tax because of fraud are not applicable in this case.

Therefore, the issue raised in this case was whether the appellant is liable under Section 73(3), (4) and Section 78 or not?

The division bench comprising of Justice Vineet Kothari and  Justice R. Suresh Kumar while taking into consideration the above facts overruled the decision of Central, Excise, and Service Tax Appellate Tribunal (CESTAT) and held that 25% of penalty is not applicable as the appellant has already paid the short-levy with the interest. Further, it also held that error in short-levy of service tax, for the purpose of ratifying the assessee is left with 2 options either by suo-moto or by paying the tax ascertained by the Central Excise and Service officer before the serving of notice. Therefore the appellant is not liable under Section 73(3) and (4) and Section 78 of the Finance Act.