Sub-contractor service tax liability remains separate despite principal contractor payment and available CENVAT credit.

A sub-contractor providing a taxable service remains separately liable to service tax even if the principal contractor has paid tax on the contract value, because tax incidence attaches to the person rendering the service under the Finance Act, 1994 and the CENVAT credit framework does not displace that levy. The availability of credit to another person in the chain does not extinguish the sub-contractor's liability. Revenue neutrality does not by itself defeat taxability, and the text states that the extended limitation period under section 73 was also invocable on the facts discussed.

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Issues: (i) Whether a sub-contractor is independently liable to pay service tax even when the principal contractor has discharged tax on the contract value; (ii) whether the plea of revenue neutrality and absence of the ingredients for invoking the extended period under section 73 of the Finance Act, 1994 could defeat the demand.

Issue (i): Whether a sub-contractor is independently liable to pay service tax even when the principal contractor has discharged tax on the contract value.

Analysis: The liability under the service tax regime attaches to the person providing the taxable service. The scheme of sections 66 and 68 of the Finance Act, 1994, read with the CENVAT credit framework under the CENVAT Credit Rules, 2004, contemplates that a sub-contractor rendering a taxable service remains separately taxable, while the recipient in the chain may avail credit in accordance with law. The arrangement between contractor and sub-contractor does not displace the statutory incidence of tax, and the exclusion of input services from bundled service principles under section 66F of the Finance Act, 1994 reinforces that each taxable activity is assessed separately.

Conclusion: The sub-contractor remains independently liable to service tax notwithstanding payment by the principal contractor.

Issue (ii): Whether the plea of revenue neutrality and absence of the ingredients for invoking the extended period under section 73 of the Finance Act, 1994 could defeat the demand.

Analysis: Revenue neutrality does not negate taxability where the statute specifically levies tax on the taxable service provided. The availability of credit under the CENVAT Credit Rules, 2004 cannot be used to deny the primary levy. On the facts, the appellant did not establish any legally sustainable ground to deny invocation of the extended period under section 73 of the Finance Act, 1994.

Conclusion: The plea of revenue neutrality failed, and the extended period of limitation was held invocable.

Final Conclusion: The demand and consequential adjudication were upheld, and the appeal was dismissed.

Ratio Decidendi: A sub-contractor providing a taxable service is independently liable to service tax, and payment of tax by the principal contractor or availability of credit does not extinguish the sub-contractor's statutory liability.

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