HC Dismisses Customs Appeal in Gutkha Export Case; No Confiscation When Packaging Uses Biodegradable Plastic

The dispute arose from an order passed by the Customs Excise and Service Tax Appellate Tribunal, Ahmedabad dated 08.10.2018 in favour of the respondent exporter, M/s R.M. Dhariwal (HUF). The Customs Department challenged the order before the High Court, contending that the Tribunal had wrongly interpreted Rules 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011 along with Sections 113(d) and 118 of the Customs Act, 1962.

The respondent exports gutkha using certain packaging material. Customs authorities had confiscated the goods and imposed penalties on the ground that the packaging used plastic material allegedly prohibited under the Plastic Waste Rules, 2011. However, laboratory testing revealed that the packaging consisted of paper, aluminum, and plastic layers, and further tests by the Central Institute of Plastics Engineering and Technology confirmed that the plastic layer was made from Poly Lactic Acid and starch-based biodegradable polyester film. The Tribunal set aside the confiscation and allowed the exporter’s appeal.

Main Issue: Whether export of gutkha packed in biodegradable plastic material violated Rules 5(d) and 5(g) of the Plastic Waste (Management and Handling) Rules, 2011, thereby attracting confiscation under Sections 113(d) and 118 of the Customs Act, 1962.

HC’s Decision: The Hon’ble High Court dismissed the Tax Appeal filed by the Customs Department and upheld the Tribunal’s order in favour of the exporter. The Court observed that similar issues involving exporters of pan masala, gutkha and tobacco products had already been considered by the Supreme Court of India in Baba Global Ltd., Harsh International and R.M. Dhariwal, where export using biodegradable plastic packaging had been permitted based on undertakings given before the Court.

The High Court held that it could not take a view contrary to the Supreme Court’s directions. It further noted that the Customs authorities had failed to establish that the exported goods were “prohibited goods” under law. Since Sections 113(d) and 118 of the Customs Act apply only when goods liable to confiscation are prohibited, those provisions were not attracted. Thus, the appeal was dismissed, and the Tribunal’s decision was upheld.

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