Sub-contractor service tax liability survives main contractor payment, and consumables alone do not turn a service contract into works contract.

A sub-contractor remains separately liable to service tax even if the main contractor has already discharged tax on the contract, unless clear material shows tax was paid on the entire value and corresponding credit was available. The possibility of Cenvat credit does not by itself bar tax on the sub-contractor. The work order was also treated as a service contract rather than a works contract, because the mere use of consumables during performance does not change the character of the arrangement. On these grounds, the service tax demand, interest, and penalty were upheld and the appeal was rejected.

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Issues: (i) Whether the appellant was not liable to service tax because the main contractor had already paid tax on the contract; (ii) Whether the services rendered by the appellant were works contract services so as to escape service tax for the period prior to 01.06.2007.

Issue (i): Whether the appellant was not liable to service tax because the main contractor had already paid tax on the contract.

Analysis: Liability under the service tax regime attaches to each service provider separately and independently. Mere payment of tax by the main contractor does not, by itself, extinguish the sub-contractor's liability. The possibility of credit under the Cenvat scheme does not establish that tax on the sub-contractor is impermissible. In the absence of clear material showing that tax was paid on the entire value and that the recipient was entitled to corresponding credit, the plea of double taxation could not be accepted.

Conclusion: The appellant remained liable to service tax notwithstanding the main contractor's tax payment.

Issue (ii): Whether the services rendered by the appellant were works contract services so as to escape service tax for the period prior to 01.06.2007.

Analysis: The work order showed that the contract was essentially for service, and the presence of consumables in the execution of the service did not convert the arrangement into a works contract. Use of consumables by a service provider during performance of the service does not automatically change the character of the contract. The nature of the work therefore did not justify exclusion from tax on the footing of works contract.

Conclusion: The appellant's activity was not treated as a works contract for the period in question.

Final Conclusion: The demand of service tax, interest, and penalty was upheld and the appeal was rejected on both grounds.

Ratio Decidendi: A sub-contractor is not exempt from service tax merely because the main contractor has paid tax, and the mere inclusion of consumables in performance of a service does not convert an otherwise taxable service contract into a works contract.

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