Service tax- calculation of basic exemption

How to avail the basic exemprtion of Rs.10Lacs in the following case:

Mr. A has provided services including cost of materials of Rs. 15 Lacs, & has opted to pay Service Tax @ 10.30% on 33% of gross amount charged. Which of the two methods is correct - 

a) Rs.15Lacs Less Rs.10Lacs (basic exemption) = 5Lacs * 33% = 1.65Lacs * 10.30% (ST) = Rs.16,995

or

b) Rs.15Lacs * 33% and then take the basic exemption if possible.

Kindly reply which is the appropriate way to avail the basic exemption?