Service tax on the same construction service should not be levied twice; refund claim remanded for factual verification.

Service tax was sought to be refunded to a main contractor after the same construction activity had also been taxed in the hands of sub-contractors. The Tribunal noted that the service was performed only once through the sub-contractors and that taxing the same service again was not justified, particularly where departmental circulars and prior Tribunal decisions had recognised that the service should not be taxed twice. The refund claim could not be rejected merely on the basis that indirect taxes do not prohibit double taxation or that credit might have been available, and the matter was sent back for fresh verification of facts by the original adjudicating authority.

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Issues: Whether service tax paid by sub-contractors on the same construction services could be treated as refundable to the main contractor on the ground that the service had already suffered tax and whether the matter required fresh verification by the original authority.

Analysis: The appellant was a main contractor who had paid service tax on the gross contract value under Notification No. 01/2006-S.T., while the sub-contractors also discharged service tax on the work actually executed by them. The prior authorities rejected the refund claim on the premise that there was no prohibition against double taxation in indirect taxes and that credit could have been availed instead. The Tribunal held that the service in question was provided only once through the sub-contractors and that taxing the same service again was not justified. It also noted that departmental circulars and earlier Tribunal decisions had settled that where the main contractor pays tax on the gross amount, the same service should not be taxed again in the hands of the sub-contractor.

Conclusion: The refund claim could not be rejected on the ground adopted by the lower authorities, and the matter was required to be re-examined by the original adjudicating authority after verification of facts.

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