Dear Amit Varma,
The answers to your queries are given below:
1. The exemtion limit of Rs.10 lakhs is per financial year. If the aggregate limit crosses the limit of Rs.9 lakhs, the service provider has to get himself registered, but need not pay any service tax since the threshold limit is Rs. 01 lakhs. He can file a NIL return, for having registered.
2. When the income in the first year is Rs.9 lakhs, second year is Rs.10 lakhs and again it is Rs.9 lakhs in the third year, you have to file NIL returns for the second and third year, since you would have applied for service tax registration the moment your turnover corssed Rs.9 lakhs in the second year.
The words used in the Exemption Notification No.6/2005-ST dated 01.3.2005 is "...... hereby exempts taxable services of aggregate value NOT EXCEEDING ........." So, upto Rs.10 lakhs you can claim exemption, per financial year. Once it crosses Rs.10 lakhs, you have to start paying service tax and file the returns accordingly.
Ananthanarayanan. P. V.