ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 09.03.2026
CESTAT Ahmedabad- No Violation of Plastic Waste (Management and Handling) Rules, 2011 in Export of RMD Gutkha by 100% EOU
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379. โโ
In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Ahmedabad, has ruled in favor of Appellant in a case concerning alleged violations of the Plastic Waste (Management and Handling) Rules, 2011. โ The case revolved around the export of RMD Gutkha in packaging materials that were suspected to be non-compliant with environmental regulations. โ The tribunal’s decision, delivered on October 8, 2018, has set a precedent for similar cases involving 100% Export Oriented Units (EOUs).
Background of the Case
The case originated from the customs authority’s seizure of goods intended for export by Appellant, a 100% EOU. โ The goods, RMD Gutkha, were packaged in materials that the customs authority believed violated Rule 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011. โ These rules prohibit the use of certain types of non-biodegradable plastic packaging materials. โ
Two shipping bills were at the center of the dispute:
- Shipping Bill No. โ 6478523 dated 01.12.2011: 10,000 kg of RMD Gutkha valued at Rs. โ 2,29,64,063/- was exported, but samples were drawn for testing. โ
- Shipping Bill No. โ 7419312 dated 03.02.2012: 10,000 kg of RMD Gutkha valued at Rs. โ 2,19,21,250/- was seized and not allowed to be exported. โ
The customs authority sent samples of the packaging material to the Customs Chemicals Laboratory in Vadodara for testing. โ The initial report indicated that the packaging material was composed of plastic, paper, and aluminum but did not clarify whether the plastic was biodegradable. โ This led to the issuance of a Show Cause Notice on July 31, 2012, proposing the confiscation of goods and imposing penalties on the appellant and other individuals involved. โ
Legal Proceedings
The adjudicating authority confirmed the charges in the Show Cause Notice, imposing hefty penalties and redemption fines on the appellant and other individuals. โ Dissatisfied with the decision, M/s R.M. Dhariwal (HUF) filed an appeal before the Commissioner (Appeals), who remanded the matter for a de novo decision. โ Despite the Commissionerโs clear instructions to re-test the packaging material to determine its biodegradability, the adjudicating authority reiterated its original findings, leading to further appeals. โ
Key Arguments by the Appellant โ
The counsel for the appellant, argued that multiple test reports from reputable laboratories, including the Central Institute of Plastics Engineering & Technology (CIPET) and Customs Laboratory, Kandla, confirmed that the packaging material was made of biodegradable plastic based on Poly Lactic Acid (PLA). โ He emphasized that the adjudicating authority had ignored these findings and the directions of the Commissioner (Appeals) to conduct proper re-testing. โ
Additionally, the appellant cited a Supreme Court judgment in the case of R.M. Dhariwal 100% EOU vs. Union of India (2016), which established that the Plastic Waste (Management and Handling) Rules, 2011, do not apply to 100% EOUs exporting goods, even if the packaging material contains non-biodegradable plastic. โ The appellant argued that this precedent should apply to their case as well. โ
Tribunalโs Observations and Final Decision โ
The tribunal carefully reviewed the submissions, test reports, and previous judgments, including the Supreme Court’s ruling in R.M. โ Dhariwal 100% EOU vs. Union of India and Baba Global Ltd. vs. Union of India. โ It noted the following:
- Test Reports Confirm Biodegradability: Multiple test reports from CIPET and Customs Laboratories confirmed that the packaging material used by the appellant was made of biodegradable plastic based on Poly Lactic Acid, which is compliant with the Plastic Waste (Management and Handling) Rules, 2011. โ
- Defiance of Commissionerโs Directions: The adjudicating authority failed to follow the Commissioner (Appeals)โ explicit instructions to re-test the packaging material and instead reiterated its original findings, which were not supported by conclusive evidence. โ
- Supreme Court Precedent: The tribunal highlighted the Supreme Courtโs judgment, which exempted 100% EOUs exporting goods from the application of the Plastic Waste (Management and Handling) Rules, 2011. โ The tribunal emphasized that the rules are aimed at preventing the use of hazardous, non-biodegradable plastic in the domestic market, not for goods meant exclusively for export. โ
Based on these observations, the tribunal concluded that the appellant had not violated the Plastic Waste (Management and Handling) Rules, 2011. โ It set aside the impugned order and allowed the appeals, ruling that the export goods were not liable for confiscation. โ
Implications of the Judgment
This decision is significant for businesses operating as 100% EOUs, particularly those involved in the export of goods packaged in materials containing plastic. โ The tribunalโs ruling reinforces the principle that the Plastic Waste (Management and Handling) Rules, 2011, are not applicable to goods manufactured for export, provided they are not sold in the domestic market. โ
The judgment also underscores the importance of adhering to procedural directions during legal proceedings. The adjudicating authorityโs failure to comply with the Commissioner (Appeals)โ instructions for re-testing was deemed a serious procedural lapse, ultimately leading to the reversal of its decision. โ
Conclusion
The CESTATโs ruling in favor of Appellant is a testament to the importance of evidence-based decision-making and adherence to legal precedents. โ It provides clarity on the applicability of environmental regulations to 100% EOUs and sets a benchmark for future cases involving similar disputes.
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Source: CESTAT Ahmedabad
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