Murugappa Management Services Ltd vs Commissioner of GST&CCE(Chennai North)

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH – COURT No. I

Service Tax Appeal Nos. 42521 to 42528 of 2017
(Arising out of Order-in-Appeal No. 142/2017(CTA-I) dated 18.09.2017 passed by
Commissioner of GST and Central Excise (Appeals-I), No. 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai – 600 034)


M/s. Murugappa Management Services Ltd. ...Appellant
Dare House, New No. 2, Old No. 234,
NSC Bose Road,
Chennai – 600 001.
Versus
Commissioner of GST and Central Excise ...Respondent
Chennai Outer Commissionerate,
Newry Towers, No. 2054-I,
nd th
2 Avenue, 12 Main Road,
Anna Nagar,
Chennai – 600 040.

APPEARANCE:
For the Appellant : Mr. G. Shiv Kumar, Advocate
For the Respondent : Ms. G. Krupa, Authorised Representative

CORAM:
HON’BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON’BLE MR. AJAYAN T.V., MEMBER (JUDICIAL)

FINAL ORDER Nos. 40972-40979 / 2026

DATE OF HEARING : 29.06.2026
DATE OF DECISION : 31.08.2026

Per Mr. VASA SESHAGIRI RAO

The present 8 appeals arise from the Order-in-Appeal
No. 142/2017 (CTA-I) dated 18.09.2017, partly allowing the
Department’s appeal against Order-in-Original No. 55-
61/2016 (ST-I) dated 24.02.2016. M/s. Murugappa
Management Services Ltd., hereinafter referred to as “the

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Appellant”, is registered with the Service Tax Department.
The dispute is related to liability to service tax under reverse
charge on foreign-currency expenditure incurred during the
period from 2005-06 to 2014-15. The SCN No. 657/2010
dated 18.10.2010, covering 2005-06 to 2009-10, proposed
demand of Service Tax of Rs.25,41,033/- on foreign travel,
tuition/training fees and membership fees, followed by six
SCNs/SODs covering subsequent periods. The Appellant has
contended that the pre-01.07.2012 notices have failed to
identify the taxable service under Section 65(105) of the
Finance Act, 1994. It appears that the Appellant has
produced invoices and transaction-wise details showing
expenditure on travel, tuition, memberships, subscriptions,
publications and professional services, with tax already paid
on several transactions.

2. The adjudicating authority dropped the pre-
01.07.2012 demands and penalties which is challenged by
the revenue before the Lower Appellate Authority as the
Commissioner (Appeals) held that absence of classification in
the notices did not invalidate the proceedings, classified
tuition fees as Commercial Training or Coaching Service and
membership fees as Club or Association Service, and
restored the demand of Rs.27,69,126/- with interest and
penalty of Rs.19,54,482/- under Section 78. The present

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appeals challenge the order on the ground that the
Commissioner (Appeals) travelled beyond the show cause
notices by introducing classifications not proposed therein.

3.1 The Ld. Advocate Shri G. Shiva Kumar for the
Appellant, submitted that the impugned Order-in-Appeal
travelled beyond the show cause notices as the notices
relating to the period prior to 01.07.2012 merely alleged
foreign-currency expenditure and non-payment of service tax
under Section 66A read with Rule 2(1)(d)(iv), without
identifying the taxable service under Section 65(105). Under
the positive-list regime, mere receipt of a service from
abroad could not attract tax unless the transaction was first
established as consideration for a specific taxable service.
The defect, therefore, went to the root of the demand and
was not a mere technical omission thus, vitiating the
proceedings.

3.2 Relying upon R. Ramadas v. Joint Commissioner
of Central Excise, 2020 (11) TMI 84 (Mad.), Thirumurugan
Enterprises v. CESTAT, 2015 (6) TMI 474 (Mad.), Principal
Commissioner, Service Tax v. Shubham Electricals, 2016 (5)
TMI 1055 (Del.) and Normal Engineers & Contractors v.
Commissioner (Appeals), 2023 (7) TMI 434 (CESTAT Delhi),
the Ld. Counsel submitted that a valid notice was required to

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disclose the taxable service and the basis of the proposed
demand. The Commissioner (Appeals) could not cure the
defect by introducing, for the first time, the classifications of
Commercial Training or Coaching Service and Club or
Association Service, neither of which had been specifically
proposed in the notices. Reliance was also placed upon
Precision Rubber Industries Pvt. Ltd. v. Commissioner of
Central Excise, Mumbai, 2016 (4) TMI 841 (S.C.), Hindustan
Polymers Co. Ltd. v. Collector of Central Excise, Guntur,
1996 (12) TMI 84 (S.C.) and Schlumberger Asia Services
Ltd. v. Commissioner of Service Tax, New Delhi, 2026 (1)
TMI 1077 (CESTAT New Delhi).

3.3 Further, the Ld. Counsel has submitted that the
transactions themselves did not satisfy the classifications
subsequently adopted. Tuition fee paid to University Global
related to an online educational programme, while
membership fees paid to the Corporate Executive Board and
Young President’s Organization were for access to research
material, publications, conferences and other resources.
Payments to Indian professionals had already suffered
service tax, while expenditure on journals, books and study
material represented procurement of goods/material. The
invoices and supporting documents produced by the

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Appellant have clearly established the nature of these
transactions.

3.4 The Ld. Counsel further averred that the demand
was revenue-neutral since any service tax paid under
reverse charge would, subject to the statutory conditions, is
available as CENVAT credit. Reliance is placed upon Jay
Yuhshin Ltd. v. Commissioner of Central Excise, New Delhi,
2000 (119) E.L.T. 718 (Tri.-LB), Anglo French Textiles v.
CCE, Puducherry, 2017 (9) TMI 1178 (CESTAT Chennai),
affirmed by the Supreme Court in 2018 (8) TMI 896,
Permanent IP Systems/Perfect Technologies, 2018 (12) TMI
19 (CESTAT Kolkata), Sarovar Hotels Pvt. Ltd. v.
Commissioner of Service Tax, Mumbai, 2017 (9) TMI 893
(CESTAT Mumbai) and Intellect Design Arena Ltd. v.
Commissioner of GST & Central Excise, Chennai, 2025 (12)
TMI 1004 (CESTAT Chennai).

3.5 Finally, the Appellant submitted that invocation
of the extended period and imposition of penalty were
unsustainable. The Appellant had maintained accounts,
disclosed the expenditure particulars, participated in audit
proceedings and, in several cases, voluntarily discharged
service tax. There was consequently no suppression of facts
or intent to evade payment of tax. The Appellant therefore

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prayed for setting aside the impugned Order-in-Appeal and
restoration of the Order-in-Original.

4.1 The Ld. Authorized Representative Ms. G. Krupa,
for the Revenue, supported the impugned order and
submitted that the Appellant had incurred foreign-currency
expenditure towards services received from abroad,
attracting Section 66A where such expenditure related to
taxable services.

4.2 It was submitted that non-mention of
classification in the notices did not invalidate the demands,
as the nature of the transactions disclosed their taxable
character. Tuition fees paid to University Global Pvt. Ltd.
were classifiable as Commercial Training or Coaching
Services and membership payments as Club or Association
Services. The Commissioner (Appeals) had therefore rightly
treated the issue as one of taxability.

4.3 The Ld. Authorized Representative further
submitted that the Appellant had itself paid service tax on
similar transactions for the subsequent period, corroborating
their taxable nature. Since the expenditure was not disclosed
in the ST-3 returns and was detected during audit,

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invocation of the extended period and penalty under Section
78 were also justified.

5. We have considered the submissions of both
sides, the seven SCNs/SODs, the Order-in-Original, the
impugned Order-in-Appeal, the invoices and other
documents placed on record and the decisions relied upon by
the Appellant. The following two questions arise for
determination: -
i. Whether the demands for the period prior to
01.07.2012 could be sustained when the relevant
notices did not identify the taxable service under
Section 65(105) of the Finance Act, 1994, and whether
the Commissioner (Appeals) could introduce a new
classification at the appellate stage?
ii. Whether the consequential interest and penalty,
including the penalty under Section 78, could survive
and whether any further liability arises in respect of the
subsequent notices?

6. We now proceed to examine the issues framed
for determination sequentially.

Issue No.(i): Sustainability of the demands for the period
prior to 01.07.2012?

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7. The principal dispute concerns SCN No.
657/2010, SOD No. 41/2011, SOD No. 90/2013 and SOD No.
47/2013, covering the period prior to 01.07.2012. During
this period, service tax operated on the positive-list regime.
Section 65(105) identified the taxable services, while Section
66A provided the mechanism for taxing specified taxable
services received from outside India. Therefore, Section 66A
could not operate merely because an assessee had incurred
expenditure in foreign currency. The Department was
required to establish that the expenditure represented
consideration for a service falling within one of the taxable
categories under Section 65(105).

8. In the present case, the notices proceeded
essentially on the basis that the Appellant had incurred
foreign-currency expenditure and had not discharged service
tax under Section 66A read with Rule 2(1)(d)(iv). The
notices did not identify the particular taxable service
allegedly received. This is significant because the
expenditure was not homogeneous. It included foreign travel
expenditure, tuition/e-learning fees, membership and
subscription payments, leadership programmes, publications,
study material and professional fees. The invoices and
documents produced by the Appellant similarly disclosed
different kinds of transactions.

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9. The adjudicating authority noticed this defect
and, for the pre-01.07.2012 period, dropped the demands.
The Commissioner (Appeals), however, proceeded on the
basis that the nature of the expenditure itself disclosed the
classification and subsequently treated the tuition fees paid
to University Global Pvt. Ltd. as Commercial Training or
Coaching Service and the membership payments as Club or
Association Service. Thus, the Commissioner (Appeals) did
not merely correct an erroneous description in an existing
charge; he supplied the very taxable categories which were
absent from the notices.

10. This distinction is crucial. If a notice identifies a
taxable service but contains an incorrect description or
classification, the question whether such error is curable may
stand on a different footing. Here, however, the notices did
not identify the taxable service at all. The Appellant was
therefore not called upon to defend itself against the
statutory ingredients of Commercial Training or Coaching
Service or Club or Association Service. The subsequent
classification by the Commissioner (Appeals) consequently
changed the basis of the demand.

11. The Appellant relied principally upon R. Ramadas
v. Joint Commissioner of Central Excise, 2020 (11) TMI 84

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(Madras High Court). The proposition relied upon is that the
show cause notice forms the foundation of the demand and
must disclose the basis on which recovery is proposed. The
principle is directly applicable here because the notices did
not merely contain an incorrect classification; they omitted
the taxable category altogether. The distinction between
knowledge of the expenditure and notice of the statutory
charge is material.

12. The Appellant also relied upon Thirumurugan
Enterprises v. CESTAT, 2015 (6) TMI 474 (Madras High
Court), wherein the requirement of sufficient particulars in a
service-tax notice was considered. The decision supports the
proposition that a notice must contain sufficient particulars
to enable the assessee to understand the precise charge and
effectively defend the proceedings. This principle applies with
greater force here because several entirely different
categories of expenditure were clubbed together in the
notices.

13. The Appellant further relied upon the decision of
the Hon'ble Supreme Court in Precision Rubber Industries
Pvt. Ltd. v. Commissioner of Central Excise, Mumbai, 2016
(4) TMI 841 (S.C.). The relevant principle, as relied upon in
the Appellant's compilation, is that the show cause notice

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constitutes the foundation of the proceedings and that the
adjudicating authority cannot decide the matter on a basis
different from that contained in the notice without giving the
assessee an opportunity to meet such a case.

14. The same principle emerges from Hindustan
Polymers Co. Ltd. v. Collector of Central Excise, Guntur,
1996 (12) TMI 84 (S.C.), relied upon by the Appellant.
Where the basis of the demand is materially changed, the
adjudication cannot proceed on the new basis without the
assessee being put to notice.

15. The Appellant also relied upon Principal
Commissioner, Service Tax, Delhi v. Shubham Electricals,
2016 (5) TMI 1055 (Delhi High Court) , concerning vagueness
in the notice and the failure to clearly identify the taxable
service. The principle supports the requirement that the
taxable service forming the basis of the demand must be
sufficiently disclosed.

16. The decisions relied upon by the Appellant may,
therefore, be succinctly stated as follows: a show cause
notice is the foundation of adjudication; the assessee must
know the precise statutory charge it is required to meet; and
a new substantive basis of demand cannot ordinarily be

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introduced at the appellate stage. We find these principles
applicable to the present case.

17. The Revenue's submission that the nature of the
transactions itself disclosed the classification cannot be
accepted. The fact that the Appellant knew what payments it
had made did not mean that it knew which statutory taxable
service the Department intended to allege. Indeed, the
Commissioner (Appeals) himself selected different
classifications for different transactions, which demonstrates
that classification was not merely an incidental description
but a substantive issue.

18. We are therefore unable to sustain the reasoning
of the Commissioner (Appeals). The appellate authority could
not cure the foundational defect in the notices by
introducing, for the first time, Commercial Training or
Coaching Service and Club or Association Service. Such a
course effectively created a new basis for the demand. As
held in the line of decisions relied upon by the Appellant,
adjudication must remain within the four corners of the show
cause notice.

19. We also find no necessity to undertake a fresh
classification of each individual transaction. Such an exercise

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would itself amount to adjudicating a case which was never
proposed in the notices. We therefore express no opinion on
whether, if properly proposed and adjudicated, any particular
transaction could independently fall under Commercial
Training or Coaching Service or Club or Association Service.
The only issue before us is whether such classification could
be introduced for the first time in the appellate proceedings.
The answer is in the negative.

20. The Revenue also relied upon the Appellant's
subsequent payment of service tax on certain transactions
after 01.07.2012. This contention cannot assist the Revenue.
From 01.07.2012, the statutory scheme underwent a
fundamental change from the positive-list regime to the
negative-list regime. Taxability under the later regime
cannot, by itself, establish that the same transaction was
taxable under a particular category during the earlier regime.
The adjudicating authority itself separately examined the two
periods.

21. We accordingly hold that the demands covered
by SCN No. 657/2010, SOD No. 41/2011, SOD No. 90/2013
and SOD No. 47/2013 could not be restored on the basis of
classifications which were never proposed in those notices.

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Issue No. 1 is answered in favour of the Appellant and
against the Revenue.

Issue No.(ii) : Interest, penalty and subsequent notices: -
22. Once the substantive demand of Rs.27,69,126/-
restored by the Commissioner (Appeals) is found
unsustainable, the consequential interest cannot survive.
Interest is consequential upon a legally recoverable tax
liability.

23. The penalty of Rs.19,54,482/- under Section 78
also cannot be sustained. The Commissioner (Appeals)
proceeded principally on the ground that the expenditure had
been detected during audit and had not been disclosed in the
ST-3 returns. However, penalty under Section 78 requires
the statutory ingredients for invoking the extended period to
be established. Where the very demand rests upon a taxable
classification which was absent from the notices, the
necessary foundation for alleging suppression with intent to
evade is absent. It is not disputed that the Appellant had
maintained books and produced the relevant expenditure
particulars and supporting documents.

24. The Appellant's plea of revenue neutrality, based
upon Jay Yuhshin Ltd. v. Commissioner of Central Excise,

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2000 (119) E.L.T. 718 (Tri.-LB), Anglo French Textiles v.
CCE, Puducherry, 2017 (9) TMI 1178 (CESTAT Chennai),
affirmed by the Hon'ble Supreme Court, Permanent IP
Systems/Perfect Technologies, 2018 (12) TMI 19 (CESTAT
Kolkata) and Sarovar Hotels Pvt. Ltd. v. Commissioner of
Service Tax, Mumbai, 2017 (9) TMI 893 (CESTAT Mumbai),
need not be examined as the appeals succeed on the more
fundamental defect in the notices. Revenue neutrality may,
however, reinforce the absence of a basis for alleging
deliberate evasion. The decisions also make clear that
revenue neutrality is a factual matter and cannot be
presumed merely from the theoretical availability of credit.

25. As regards the post-01.07.2012 proceedings, the
adjudicating authority had separately examined SOD Nos.
42/2014, 05/2015 and 02/2016, taking into account the
taxes already paid and distinguishing taxable services from
foreign travel expenditure, subscriptions, publications and
study material. The Departmental appeal which resulted in
the impugned order was directed against the dropping of the
pre-01.07.2012 demands. Those subsequent findings,
therefore, cannot be reopened in the present appeals.

26. We accordingly answer Issue No. 2 also in favour
of the Appellant insofar as it relates to the demand restored

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by the Commissioner (Appeals), the consequential interest
and the penalty of Rs.19,54,482/- under Section 78.

27. In view of the foregoing, the impugned Order-in-
Appeal No. 142/2017 (CTA-I) dated 18.09.2017 is set aside
to the extent it restores the demand of Rs.27,69,126/- with
interest and imposing a penalty of Rs.19,54,482/- under
Section 78. The Order-in-Original No. 55-61/2016 (ST-I)
dated 24.02.2016 is restored to that extent. The findings of
the adjudicating authority concerning the subsequent SOD
Nos. 42/2014, 05/2015 and 02/2016, including amounts
already paid/accepted shall remain undisturbed. Thus, the
appeals are accordingly allowed with consequential relief, if
any, in accordance with the law.
(Order pronounced in open court on 31.08.2026)


Sd/- Sd/-
(AJAYAN T.V.) (VASA SESHAGIRI RAO)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)

MK