D.N. Panda, Judicial Member. - Being aggrieved by the order of adjudication passed on 23-9-2008 by the learned Commissioner, Service Tax, New Delhi, the appellant came in Appeal to Tribunal with stay application for stay of realisation of the demand raised by that order with following consequence:

(i)Service Tax amounting to Rs. 124,99,49,345 (Rupees one hundred twenty four crore, ninety nine lakh, forty nine thousand three hundred and forty five only) out of Rs. 126,26,10,497 was confirmed and recoverable from the appellant under the proviso to section 73(1) read with section 68 of the Finance Act, 1994 and rule 6 of Service Tax Rules, 1994.

(ii)Education cess and Secondary and higher education cess amounting to Rs. 3,04,18,968 (Rupees three crore, four lakh, eighteen thousand, nine hundred and sixty eight only) out of Rs. 3,06,42,746 was confirmed against the appellant under the proviso to section 73(1) read with section 66 of the Finance Act, 1994, section 95 of Finance Act, 2004 and section 136 of Finance Act, 2007.

(iii)Penalty of Rs. 1,000 (Rupees one thousand only) was imposed upon the appellant under section 77 of the Finance Act, 1994 for contravention of the provision of the Act ibid and the Rules framed thereunder; and

(iv)Penalty of Rs. 128,03,68,313 (Rupees one hundred twenty eight crore, three lakh, sixty eight thousand, three hundred and thirteen only) equivalent to the amount of service tax including both type of cess was imposed upon the Appellant under section 78 of the Finance Act, 1994 for suppressing the value of the taxable services provided by the appellant with an intent to evade payment of service tax.

2. Aforesaid adjudication was made against the appellant relating to the period 19-4-2006 to 31-12-2006, denying exemption claimed by the appellant on the ground of exporting of business auxiliary service to the foreign principal. Such service was taxed by the impugned order. Added to this, service of repair and maintenance of software was made taxable by that order.

3. In terms of a market Development Agreement dated 1-7-2005 (sample copy available in appeal folder at pages 41-46), Microsoft Operation Pvt. Ltd. of Singapore (hereinafter referred to as "MO") appointed the appellant to provide various technical support services including marketing of Microsoft products in the "territory" defined by the agreement and to identify the services to be provided by the Singapore concern to the Appellant. In the said agreement, the Appellant is referred to as the "subsidiary" and the term "territory" was defined to include Bhutan, India, Maldives, Nepal and British Indian Ocean Territory. Both "MO" i.e., Singapore concern and the "subsidiary" i.e., appellant are wholly owned subsidiaries of the holding company M/s. Microsoft Corporation of Washington (hereinafter referred to as "MSFT"). 4 (four) types of services were intended to be provided in terms of the above Agreement and those are as follows:

"2. Product support services & consulting services

2.1 Product Support Services and Consulting Services - Subsidiary shall have a non-exclusive right to provide product support services and consulting services for Microsoft Products in the Territory.

2.2 Subsidiary’s Duties

2.2.1 Subsidiary will use its best efforts to further the interests of M.O. and to maximize the markets for product support services and consulting services in the Territory.

2.2.2 Subsidiary shall not solicit orders of agreements from outside the Territory.

2.2.3 Subsidiary may provide product support services, which may include standard Microsoft product support services for products which are generally made available to end users and may include requests for support originating from the Territory.

2.3 MO’s Duties - MO will use its best efforts to assist Subsidiary with technical matters in connection with the marketing of Microsoft Products and Services.

3. Marketing of microsoft products

3.1 Marketing - Subsidiary shall have a non-exclusive right to marke