Service tax rate depends on the date of entry in service, not billing or payment timing.

Service tax liability was held to be governed by the date of entry in service under the substantive provisions of the Finance Act, 1994. The Court distinguished those provisions from the procedural rules in the Service Tax Rules, 1994, and held that procedural requirements could not alter the statutory basis for determining the applicable rate. On that reasoning, the rate prevailing when the service was entered into applied, not the rate at billing or receipt of payment, and the assessee succeeded.

---

---

Issues: Whether service tax was payable at the rate prevailing on the date of entry in service or at the rate prevailing on the date of billing and receipt of payment.

Analysis: The Tribunal's view was affirmed that the relevant date for determining service tax liability was the date of entry in service. The Court distinguished between the substantive scheme of service tax under the Finance Act, 1994 and the procedural provisions in the Service Tax Rules, 1994, holding that the substantive statutory provisions governed the issue and showed that the applicable rate was to be taken on the date the service was entered into.

Conclusion: Service tax was payable at the rate prevailing on the date of entry in service, not at the rate prevailing on the date of billing or receipt of payment, and the appeal was dismissed in favour of the assessee.

Ratio Decidendi: For service tax, the applicable rate is determined by the date of entry in service under the substantive provisions of the taxing statute, and procedural rules cannot displace that liability basis.

---