2018 (10) TMI 669 - AT - Customs

Tribunal rules in favor of 100% Export Oriented Unit on Plastic Waste Rules compliance

The tribunal ruled in favor of the appellant, a 100% Export Oriented Unit, stating that they did not violate the Plastic Waste Rules as their packaging ... 100% EOU - packing material used is in the prohibited category - bio-degradable in nature or not? - Rule 5(d) and 5(g) of the Plastic Waste (Management And Handing) Rules, 2011 - whether the appellant manufacturer has violated Rule 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011, in the course of exporting the goods namely RMD Gutkha (4 gms)? Held that:- The Customs authorities drawn a sample sent for test to Customs laboratory, Vadodara, wherein, the report reveals that the packaging material is composed of paper, Aluminium and Plastic, however, the said report does not clarify whether the nature of plastic is bio-degradable and non Poly Lactic Acid and otherwise. Therefore, the said report was not clear. It was further, clarified that the packaging material is made of plastic which is of Poly Lactic Acid. Despite of the report, which shows that the plastic used in packaging material is bio-degradable, the adjudicating authority held that the appellant have violated the Rule 5(D) And 5(G) Plastic Waste (Management And Handing) Rules, 2011. From report of Customs laboratory, Kandla, it is seen that the plastic layer in the packaging material is made of Poly Lactic Acid / Co-polymer Lactic Acid. From all the above report of the Chemical Examiner it is clear that the plastic based on Ploy Lactic Acid is made of starch which is clearly bio-degradable. Therefore, as per the direction of the Commissioner (Appeals) in the first appellate order the adjudicating authority had no option except to allow the appeal, however, he in complete defiance of the Commissioner Appeal’s direction, once again visited on the original issue and given the finding that irrespective of any nature of plastic there is a violation of Rules, 5(d) and 5(g) of Plastic Waste (Management And Handing) Rules, 2011, which is absolutely incorrect and illegal. Hon’ble Supreme Court in the case of R.M. DHARIWAL 100% EOU VERSUS UNION OF INDIA [2016 (11) TMI 502 - SUPREME COURT] has taken up clear view that if the goods are manufactured in 100% EOU and the said goods is exported and not cleared in the domestic market, the operation of Plastic Waste (Management and Handing) Rules, 2011 is exempted. The Hon’ble Supreme Court in this judgment laid down a principle that in case of export of goods the Plastic Waste (Management and Handing) Rules, 2011, is not applicable. As per the judgments of Supreme Court even if the packaging material contains non Bio-degradable plastic but the goods is exported, the Plastic Waste (Management and Handing) Rules, 2011 shall not apply - there is no case of violation of Plastic Waste (Management and Handling) Rules, 2011 against the appellant. Appeal allowed - decided in favor of appellant. Issues Involved:1. Violation of Rule 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011.2. Confiscation of goods and imposition of penalties.3. Compliance with the directions for re-testing of the packaging material.4. Applicability of Supreme Court judgments regarding the exemption from Plastic Waste Rules for 100% EOUs.Detailed Analysis:1. Violation of Rule 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011:The primary issue in the appeal was whether the appellant, a 100% Export Oriented Unit (EOU), violated Rule 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011, by using prohibited packaging materials for exporting RMD Gutkha. The customs authority seized the goods under the belief that the packaging material was prohibited. However, test reports from CIPET and the Customs Laboratory indicated that the packaging material was composed of bio-degradable polymers, specifically Poly Lactic Acid. The Central Pollution Control Board also clarified that the packaging material did not violate the said rules.2. Confiscation of Goods and Imposition of Penalties:The adjudicating authority confirmed the charges and imposed penalties, including confiscation of goods, redemption fines, and penalties on various individuals associated with the appellant. The goods covered under shipping bill No. 7419312 dated 03.02.2012 were held liable for confiscation, and a redemption fine of Rs. 55 Lakh was imposed. For the goods already exported under shipping bill No. 6478523 dated 01.12.2011, a redemption fine of Rs. 57 Lakh was imposed. Penalties were also imposed on M/s. R.M. Dhariwal and other individuals under Section 114.3. Compliance with Directions for Re-Testing of Packaging Material:The Commissioner (Appeals) had earlier remanded the matter with directions for re-testing the goods by an appropriate laboratory to ascertain if the plastic used was bio-degradable. Despite the re-testing confirming the bio-degradable nature of the plastic, the adjudicating authority reiterated the original order, which was found to be incorrect and illegal. The Commissioner (Appeals) had clearly stated that if the plastic was bio-degradable, there would be no violation of the Plastic Waste Rules, and export should be permissible.4. Applicability of Supreme Court Judgments Regarding Exemption from Plastic Waste Rules for 100% EOUs:The appellant cited a Supreme Court judgment (R.M. Dhariwal 100% EOU vs. Union of India) which allowed 100% EOUs to export goods in plastic packaging, exempting them from the Plastic Waste Rules, provided no part of the production was sold in the domestic market. The Supreme Court confirmed that the Plastic Waste Rules do not apply to exports by 100% EOUs. This principle was upheld in several similar cases, including Baba Global Ltd. and Harsh International, where the Supreme Court exempted the export of goods from the operation of the Plastic Waste Rules.Conclusion:The tribunal concluded that the appellant did not violate Rule 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011, as the packaging material was bio-degradable. Furthermore, based on the Supreme Court's judgments, the Plastic Waste Rules do not apply to 100% EOUs exporting goods. Consequently, the confiscation of goods and imposition of penalties were set aside, and the appeals were allowed. The tribunal emphasized that the adjudicating authority should have complied with the directions for re-testing and the Supreme Court's rulings, which exempted the appellant from the Plastic Waste Rules for their exports.