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That just sounds like retarded design logic.
If its your own server, VAC off, like my game is also, Steam really have no right to ban you for anything on your own server.
Problem is, the VAC system is basically trusted by to many, gives it the false impression its never wrong when clearly it is.
Software is so complex nowdays its really an arrogant position to not have a flexible policy around this thats evidence based at the very least.
Thats would not solve everyones problems but it would be a step in the right direction.
Steam have always been control freaks and have always had pretty sneaky business practices, hence why EPIC games and others are not as bad as people think lol !!!
So, is there STEAM bursting out your ears yet ?
Gabe Steam !
Sadly VAC wont get removed because that was seen as hacking/manipulating files
sorry man.
You can have cheat engine open (or any other method of cheating and be cheating in a game that has no security and start a game with VAC and if cheat engine is not cheating in the VAC secured game it will not detect cheat engine even if it on and in the back ground.
If you start a game server without VAC enabled (on the server) then it cannot detect cheats because it is not enabled.
You are allowed to start private games without VAC enable and cheat as much as you like. Its only public games that it matters in.
You should read how the system works. It is a delayed system It does not ban straight away. The op said he played one day then got the VAC ban the next. That is not how it works it takes weeks for a ban to be implemented. They have delayed bans so they can collect as much data on the cheat before its ban and the longer they wait the more people they catch. If they baned straight away the cheaters would know and just change some of the code in the cheat so its no longer detected. This way its too late for them.