Prior taxation of subcontracted services must be verified before service tax, interest, or penalty can be sustained.

Where a sub-contractor's service was alleged to have already suffered service tax in the hands of the principal contractor, the adjudicating authority had to verify prior taxation before fastening liability on the appellant. The order noted that the effect of value addition and change of hands also required examination before taxability could be concluded. If the same service had already been duly taxed in accordance with law, interest and penalty would not survive. The matter was remitted for fresh verification on the limited question of prior tax payment and the consequential exposure to service tax, interest, and penalty.

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Issues: Whether the appellant, as a sub-contractor, was liable to service tax where the same service was stated to have already suffered tax in the hands of the principal contractors, and whether interest and penalty could survive on that basis.

Analysis: The matter required verification by the adjudicating authority as to whether the services rendered by the appellant had already suffered tax at the hands of the principal contractors. The order also noted that the effect of value addition with change of hands had to be examined before a final conclusion on tax liability could be reached. If the tax had been duly paid in accordance with law, interest and penalty would not arise.

Conclusion: The issue was not finally decided on merits and was sent back for fresh verification by the adjudicating authority; the appellant was to escape liability if prior taxation of the same service was established.

Final Conclusion: The appeal was remitted for reconsideration on the limited question of prior tax payment on the same service and the consequential exposure to service tax, interest, and penalty.

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