Territorial jurisdiction for excise penalty and Rule 26 liability of a partnership firm upheld on offence-based principles.

Territorial jurisdiction in central excise penalty proceedings depends on the place where the offence is committed, so the Ludhiana adjudicating authority was competent to act where irregular Cenvat credit was availed on fake invoices. The objection that the penalty was extra-jurisdictional was rejected. Penalty under Rule 26 was also held maintainable against a partnership firm, on the settled principle that the firm can be proceeded against in such penalty proceedings where the provision permits action against a person responsible for the offence. The challenge to penalty on the ground that it was imposed on the firm was rejected. The Commissioner (Appeals) order was set aside and the matter was remanded for decision on merits.

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Issues: (i) whether the Deputy Commissioner at Ludhiana had jurisdiction to impose penalty on the respondent in relation to the irregular availment of Cenvat credit based on fake invoices; (ii) whether penalty under Rule 26 could be imposed on the firm.

Issue (i): Whether the Deputy Commissioner at Ludhiana had jurisdiction to impose penalty on the respondent in relation to the irregular availment of Cenvat credit based on fake invoices.

Analysis: Territorial jurisdiction in central excise matters turns on the place where the offence is committed. The irregular credit was availed within the jurisdiction of Ludhiana, and the adjudicating authority at Ludhiana was therefore competent to proceed against the respondent for the offence connected with the fake invoices.

Conclusion: The objection that the penalty was extra-jurisdictional was rejected.

Issue (ii): Whether penalty under Rule 26 could be imposed on the firm.

Analysis: The decision proceeded on the settled principle that a partnership firm is not distinct from its partners for the purpose of such penalty proceedings. On that basis, the penalty imposed on the firm rather than the individuals was held to be within the scope of Rule 26.

Conclusion: The challenge to penalty on the ground that it was imposed on the firm was rejected.

Final Conclusion: The order of the Commissioner (Appeals) was set aside and the matter was sent back for decision on merits, with the parties left free to raise all contentions before the appellate authority.

Ratio Decidendi: In central excise adjudication, jurisdiction is determined by the place where the offence is committed, and a firm may be proceeded against under Rule 26 where the statutory provision permits action against a person responsible for the offence.

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