Sub-contractor service tax liability and extended limitation depend on proof of main contractor's tax payment and factual verification.

A sub-contractor may remain liable for service tax even where the main contractor has allegedly discharged tax on the same activity, and bare assertion without documentary proof is insufficient to displace the demand. On limitation, the extended period was treated as dependent on factual verification of whether tax had already been paid by the main contractor, especially in a dispute involving interpretation of subcontract taxability. The matter was remanded for limited verification; if payment by the main contractor is proved, the demand is confined to the normal period with interest and without penalty, but if not proved, the full demand, interest and penalty remain sustainable.

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Issues: (i) Whether service tax was payable by the sub-contractor even if the main contractor had discharged the tax on the same activity; (ii) whether the extended period of limitation could be invoked on the facts of the case and what consequential relief should follow.

Issue (i): Whether service tax was payable by the sub-contractor even if the main contractor had discharged the tax on the same activity.

Analysis: The liability of a sub-contractor to pay service tax was examined in light of the Larger Bench view that a sub-contractor remains liable even where the main contractor has paid tax on the work entrusted under the contract. The appellant did not place documentary evidence to establish that the main contractor had actually discharged the service tax liability for the relevant activity.

Conclusion: The sub-contractor could not succeed on merits merely by asserting payment by the main contractor, and the demand was not set aside on this ground.

Issue (ii): Whether the extended period of limitation could be invoked on the facts of the case and what consequential relief should follow.

Analysis: The demand was based on Form 26AS and the dispute involved the taxability of subcontract activity, a matter treated as one of interpretation in similar cases. The extended period benefit was considered available only if the appellant could substantiate the plea that tax had already been paid by the main contractor. The matter therefore required factual verification before final quantification.

Conclusion: The matter was remanded for verification, and if the appellant proves payment by the main contractor, the demand is to be confined to the normal period with interest and without penalty; failing proof, the full demand, interest, and penalty would remain sustainable.

Final Conclusion: The controversy was not finally determined on merits and was sent back for limited factual verification affecting the extent of demand, interest, and penalty.

Ratio Decidendi: A sub-contractor may remain liable to service tax notwithstanding payment by the main contractor, but the extended period cannot be applied without proper factual verification where the dispute is one of interpretation and supporting evidence is required.

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