Service tax query

Due to non-registration under Tax, Service provider (taxable service) did not charge service tax inspite of verbal requests. After 5 years, they have raised supplementary Invoices ( involving both 10% & 12% rates, as in between tax rates have undergone change). Service provider Firm is telling us to deduct 2% tax at source on Service Tax amount. Making delayed payment and then taking cenvat credit right now is okay as per Taxation rules etc. No interest is being paid. I am confused. Please advise me.