Service tax rate follows the date of service, so later payment cannot trigger an enhanced composition rate.

For service tax under the composition scheme, the applicable rate is determined by the date of rendition of services, not by the date on which payment is received. Services provided before 01.03.2008 could not be subjected to the enhanced rate introduced by Notification No. 7/2008-ST merely because consideration was realised later. On that basis, the enhanced 4% rate was held inapplicable to the disputed receipts, and the demand, interest, and penalties were unsustainable. The departmental challenge failed, and the order setting aside the demand was affirmed.

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Issues: Whether the enhanced service tax rate introduced by Notification No. 7/2008-ST applied to works contract services rendered before 01.03.2008 but paid for thereafter.

Analysis: The dispute turned on the taxable event for service tax under the composition scheme. The governing principle applied was that the rate of tax is determined with reference to the date on which the services are rendered, not the date on which payment is received. Since the services in question were provided before 01.03.2008, the subsequent increase in the composition rate could not be invoked merely because the consideration was received later. The prior decision relied upon had already held that a contrary departmental instruction could not override the legal position.

Conclusion: The enhanced rate of 4% was not applicable to the disputed receipts. The demand, interest, and penalties were unsustainable, and the assessee succeeded.

Final Conclusion: The departmental challenge failed and the order setting aside the demand was affirmed.

Ratio Decidendi: For service tax, the applicable rate is governed by the date of rendition of services, and a later payment date does not attract an enhanced rate introduced after the services were provided.

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