Service tax liability turns on the date of service, not later payment or retrospective amendment.

Service tax liability was held to depend on when the service was actually provided, not on later receipt of payment or a later amendment. Chartered accountant services rendered before the levy came into force were not taxable merely because payment was received afterward, so the demand failed. For subcontracted work, where the main contractor had paid tax on the gross value, separate demand on the subcontractor was not sustained and was also time-barred. Management consultancy services rendered before the withdrawal of exemption under Notification No. 59/98-ST remained exempt, so the retrospective demand could not stand. Penalties and interest also fell once the tax demands were set aside.

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Issues: (i) whether service tax was payable on chartered accountant services rendered before the service became taxable merely because payment was received later; (ii) whether service tax could be demanded from a sub-contractor where the main contractor had discharged tax on the gross value; and (iii) whether exemption under Notification No. 59/98-ST continued for management consultancy services rendered before the amendment of 01.08.2002.

Issue (i): whether service tax was payable on chartered accountant services rendered before the service became taxable merely because payment was received later.

Analysis: Liability to service tax depends on the date of provision of service. If the service was rendered before the levy on chartered accountant services came into force, subsequent receipt of payment does not create taxability.

Conclusion: The demand was unsustainable and was set aside.

Issue (ii): whether service tax could be demanded from a sub-contractor where the main contractor had discharged tax on the gross value.

Analysis: A circular issued by the Board clarified that where the main contractor pays service tax on the gross amount including the sub-contractor's portion, the sub-contractor need not separately discharge tax. The demand was therefore not pursued on merits and was hit by limitation.

Conclusion: The demand was set aside on the ground of time bar.

Issue (iii): whether exemption under Notification No. 59/98-ST continued for management consultancy services rendered before the amendment of 01.08.2002.

Analysis: The relevant services were exempt during the period when rendered. An amendment withdrawing the exemption could not be applied retrospectively to fasten tax liability for the earlier period.

Conclusion: The demand was unsustainable and was set aside.

Final Conclusion: All the disputed demands failed, and the penalties and interest also could not survive once the tax demands were set aside.

Ratio Decidendi: Service tax liability is determined by the date of provision of service, and a later amendment or later receipt of payment cannot retrospectively create tax liability where the service was not taxable or was exempt during the relevant period.

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