Service tax rate follows the date of service rendition, not billing or payment, for consulting engineering services.

For consulting engineering services received from outside India, the applicable service tax rate is the rate in force on the date the services are rendered. Billing or receipt of payment does not determine the rate unless a specific provision so provides. A service completed before a levy or rate increase cannot be taxed at the later rate merely because invoicing or payment occurs afterwards. The Board clarification relied upon did not alter this position, so the demand based on the later date was unsustainable and consequential relief followed.

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Issues: Whether, for consulting engineering services received from a service provider outside India, the applicable rate of service tax is to be determined on the date of rendering of services or on the date of billing or receipt of payment.

Analysis: Service tax liability arises from the rendering of taxable services, and the timing of collection may differ from the time of service. In the absence of any specific provision making billing or receipt of charges the determinative factor, the applicable rate is the rate prevailing on the date when the services are rendered. A service already rendered before the levy or before an enhanced rate comes into force cannot be subjected to tax at the later rate merely because billing or payment occurs afterwards. The Board clarification relied upon did not authorize a contrary principle and could not override the legal position.

Conclusion: The applicable rate of service tax is the rate in force on the date of rendering of services, not the date of billing or payment, and the demand based on the later date was unsustainable.

Final Conclusion: The demand and penalty did not survive, and the assessee was entitled to consequential relief.

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