Works contract service tax cannot be demanded again where VAT was paid and tax on gross value was already discharged.

Where construction was undertaken as a works contract with supply of materials and VAT had already been paid on the contract value, no further service tax could be levied on the same activity. The assessee produced VAT challans and other record to show that the contract involved material supply and that service tax had been paid at 2% of the gross works contract value. On those proved facts, the additional service tax demand was not sustainable, and the related demand for interest and penalty also failed.

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Issues: Whether the appellant was liable to pay further service tax on the activity of construction undertaken along with materials, where Value Added Tax had already been paid on the works contract amount.

Analysis: The appellant produced VAT challans to show that the contract was executed with supply of material and that VAT had been paid on the works contract value. On the facts proved on record, the payment of service tax at 2% of the gross value of the works contract was accepted as proper, and no further service tax could be demanded on the same activity.

Conclusion: The appellant was not liable for any additional service tax demand, and the impugned order confirming demand, interest, and penalty was unsustainable.

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