Service tax arises on provision of service, not later payment, where consulting engineering work predated the levy.

Service tax liability depends on the taxable event, namely the provision of consulting engineering service, not on later receipt of consideration. Where the service was completed before the levy became effective and there was no evidence of service rendered during the taxable period, payment received after the effective date did not make the transaction taxable. On that reasoning, the demand was treated as unsustainable and relief followed for the assessee.

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Issues: Whether service tax could be levied on consideration received after the levy commenced when the consulting engineering service itself had been provided before the commencement of commercial production and before the effective date of the levy.

Analysis: The appellant's commercial production began on 01.03.1996, and the record disclosed no evidence that consulting engineering service was rendered during the period sought to be taxed or continued after 07.07.1997. The liability to service tax arises from the taxable event, namely the provision of service, and not merely from later receipt of consideration. Since the service activity had already occurred before the levy became effective, the post-07.07.1997 receipt of payment did not create taxability.

Conclusion: The demand of service tax was not sustainable and the appeal was allowed in favour of the assessee.

Final Conclusion: Tax could not be fastened on a service already provided before the levy came into force, and the impugned demand was set aside with consequential relief.

Ratio Decidendi: Service tax is attracted by the provision of the taxable service, and consideration received after the effective date does not by itself render a pre-levy service taxable.

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