Service tax follows service provision and receipt-based valuation, not later billing or delayed payment.

Service tax liability arises from the date of provision of the taxable service, so commission agent services rendered during an exempt period could not be taxed merely because consideration was received later. Tax also could not be computed on billed amounts where payment had not been received, requiring recomputation of taxable value under the receipt-based rule. The assessee's claim to small service provider exemption under Notification No. 6/05-S.T. was left open for consideration in de novo proceedings. The demand and penalty were set aside for fresh determination of taxable value and further examination of the remaining exemption claim.

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Issues: (i) Whether service tax could be demanded on amounts outstanding on 9-7-04 for commission agent services rendered before the service became taxable. (ii) Whether service tax could be levied on billed amounts not yet received. (iii) Whether the assessee's claim for small service provider exemption could be considered in remand proceedings.

Issue (i): Whether service tax could be demanded on amounts outstanding on 9-7-04 for commission agent services rendered before the service became taxable.

Analysis: The taxable event in service tax is the provision of taxable service. In the absence of a provision like the excise law fixing the relevant rate by reference to a different date, the applicable rate and liability depend on the date of provision of service. Services rendered during the period when commission agent services were exempt under Notification No. 13/2003-S.T. could not be taxed merely because payment was received later, after the exemption ceased to operate.

Conclusion: The demand could not include amounts outstanding on 9-7-04 for services provided before that date, and this issue was decided in favour of the assessee.

Issue (ii): Whether service tax could be levied on billed amounts not yet received.

Analysis: Under Rule 6(1) of the Service Tax Rules, 1994, tax is payable by the prescribed date after receipt of payment for the taxable service. The reasoning accepted that tax could not be computed on mere billing where payment had not been received, and the assessable value required recomputation accordingly.

Conclusion: Service tax could not be charged on the billed amount merely because it had been invoiced, and this issue was decided in favour of the assessee.

Issue (iii): Whether the assessee's claim for small service provider exemption could be considered in remand proceedings.

Analysis: The claim for exemption under Notification No. 6/05-S.T. was treated as a legal contention that had not been examined by the original adjudicating authority. It was held open for consideration during de novo proceedings after remand.

Conclusion: The claim could be raised and examined on remand, without any final adverse finding against the assessee on that point.

Final Conclusion: The demand and penalty order were set aside for fresh determination of the taxable value, with the assessee succeeding on the principal questions relating to prior exemption and receipt-based valuation, while the matter was remitted for recomputation and further consideration of the remaining legal claim.

Ratio Decidendi: For service tax, liability is governed by the date of provision of the taxable service, and in the absence of a contrary statutory rule the demand cannot be computed on services rendered during an exempt period merely because consideration is received later.

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