Rules 39 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 39 to 43 are the enforcement end of Chapter VII. Rule 39 lets the CPCB levy environmental compensation, with a carry-forward and a partly refundable structure for producers who cure a shortfall. Rule 40 sends contravention to the penalty in section 15 of the EP Act. Rule 41 provides inspection and audit, rule 42 sets up a Steering Committee, and rule 43 applies the other hazardous waste provisions to used oil.
These Rules are current as amended up to G.S.R. 636(E) dated 16 July 2026 (Chapter VIII on non-ferrous metal scrap in force from 1 April 2026). Later amendments, CPCB guidelines, notifications and portal instructions should be checked. If you face a compensation demand or an audit, see our legal dispute resolution service.
The CPCB lays down guidelines for environmental compensation on producers for unfulfilled EPR, false certificates and other violations (rule 39). Unfulfilled EPR carries forward for up to three years, and eighty-five, sixty or thirty per cent of the compensation is returned if the shortfall is made good after one, two or three years. Contravention attracts a penalty under section 15 of the EP Act (rule 40). The CPCB audits compliance (rule 41).
Rule 39: environmental compensation
| Sub-rule | Provision |
|---|---|
| 39(1) | The CPCB lays down guidelines for imposition and collection of environmental compensation on producers for non-fulfilment of obligations in the Chapter, for transaction or use of false EPR certificates, or on any entity for violation of any provision of the Chapter or the guidelines |
| 39(2) | It is also levied on recyclers for issuing false EPR certificates and providing false information |
| 39(3) | It is also levied on unregistered producers, recyclers and any entity that aids or abets a violation |
| 39(4) | Payment does not absolve the producer from EPR; unfulfilled EPR for a year is carried forward to the next year and so on, up to three years; the refund structure is below |
| 39(5) | False information resulting in over-generation of certificates by a recycler above five per cent of the actual recycled waste results in revocation of registration and compensation that is not returnable; a third or later offence or violation results in permanent revocation, in addition to the compensation |
| 39(6) | Funds collected are kept in a separate escrow account by the CPCB and used for collection and recycling or end-of-life disposal of uncollected and non-recycled used oil on which compensation is levied, and on other heads decided by the Committee; the Steering Committee decides modalities and heads with the Central Government's approval |
The CPCB's guideline sets the amount; the Rules do not print a rate, and the compensation rates in the guidelines are outside this article.
The refund structure in rule 39(4)
| When the shortfall is addressed | Share of compensation returned to the producer |
|---|---|
| After one year | Eighty-five per cent |
| After two years | Sixty per cent |
| After three years | Thirty per cent |
| Thereafter | Nothing is returned |
So there is a premium for curing the shortfall early, and the producer remains bound to fulfil the EPR in any case. The price band for certificate trading is linked to this compensation: under rule 29, the highest and lowest exchange prices are fixed at hundred per cent and thirty per cent of the compensation; see rules 25 to 30.
A recycler faces the harder edge in rule 39(5). Over-generation of certificates above five per cent of the actual recycled waste on the strength of false information is a revocation event, and compensation in that case "shall not be returnable". Repeat violation three times or more may lead to permanent revocation. Producers who buy certificates from a recycler that is later found to have issued false ones can be charged compensation for transaction or use of false certificates under rule 39(1), which is why due diligence on recyclers' portal records matters.
Rule 40: action for contravention
Rule 40 reads: "Any person who fails to comply or contravenes the provisions of these rules shall be liable to a penalty in accordance with the provisions of section 15 of the Act." The rule was substituted by G.S.R. 698(E) of 12 November 2024. The earlier text, inserted by the 2023 Chapter VII rules, was headed "Prosecution"; the substituted rule speaks of "penalty in accordance with section 15". The penalty is explained in the sister article on sections 15 to 15B of the EP Act, and the adjudication of such penalties in sections 15C and 15D. This article restates no figure.
Rule 41: verification and audit
- The CPCB, by itself or through a designated agency, verifies compliance by producers, used oil importers, bulk generators, collection agents and recyclers "through inspection and periodic audit, as deemed appropriate" and takes action against violations under rule 39.
- Any fee for verification and audit is charged by the CPCB from the concerned registered entity.
Certificates are also subject to audit under rule 27(4)(iv). Keep portal records, invoices, weighbridge slips and recycler certificates in a form that can be audited.
Rule 42: the Steering Committee
The Committee is headed by the Chairperson of the CPCB, and has these other members: one representative of the Ministry of Environment, Forest and Climate Change; one of the Ministry of Petroleum and Natural Gas; a maximum of two representatives of producers; a maximum of two of Automobile Manufacturer Associations; a maximum of two of recycler associations; one representative of a State Board or Pollution Control Committee as co-opted by the Chairman; the Member Secretary of the CPCB; and the head of the concerned CPCB division as Member Convener.
Its functions are: overall monitoring and supervision of the Chapter; deciding disputes on representations received and referring any substantial issue to the Central Government; reviewing and revising targets, weightage and permissibility of recycling modes in view of technological advancements, with recommendations to the Central Government; and taking measures necessary for proper implementation. It may co-opt other members. The Committee is also the body whose approval the CPCB needs for certificate denominations and for the use of escrow funds.
Rule 43: other provisions apply
"The provisions relating to hazardous wastes under these rules shall also apply to utilisation and management of used oil under this Chapter." In practice, the rules on authorisation, storage, records, transport and manifest, and appeal apply to used oil along with the Chapter's EPR provisions. The manifest system for used oil is, under rule 30(4), for those entities that need authorisation.
How to protect yourself
- Reconcile every quarter with each recycler's portal entries; differences resolve to the lower figure.
- Cure shortfalls early; the refund falls from eighty-five to thirty per cent over three years.
- Do due diligence on recyclers: registration status and a track record of genuine certificate generation.
- Keep an audit file: contracts, weighbridge records, purchase records and portal exports.
- If a demand arrives, check it against the CPCB's guidelines, then respond in writing and consider the adjudication route under the Act.
Example
Eastern Lubes Private Limited falls short of its target in one year, and the CPCB levies environmental compensation under the guidelines. The company buys the missing certificates in the next year and the shortfall is addressed after one year, so eighty-five per cent of the compensation is returned. The balance stays with the CPCB's escrow account. In a separate case, a recycler that over-generated certificates by more than five per cent of actual recycled waste on false information loses its registration, and its compensation is not returned.
Need help with compensation or audit?
Compensation and audit questions turn on records and timing. Our legal dispute resolution team can help you check a demand against rule 39, respond to an audit and plan an appeal or adjudication defence.
Key takeaways
- Environmental compensation applies to unfulfilled EPR, false certificates, unregistered entities and any violation of the Chapter.
- Unfulfilled EPR carries forward up to three years; eighty-five, sixty or thirty per cent of compensation is returned if cured after one, two or three years.
- A recycler over-generating certificates by more than five per cent on false information loses registration; compensation is not returned.
- Rule 40 sends contravention to the penalty under section 15 of the EP Act.
- The CPCB audits; a Steering Committee led by the CPCB Chairperson oversees the Chapter.
Read next
- Rules 31-38: duties of producers, importers, collectors, recyclers and authorities
- Rules 25-30: EPR for used oil
- Sections 15 to 15B of the EP Act: residuary penalty
- Sections 15C and 15D of the EP Act: adjudicating officer, inquiry and appeal
Disclaimer: Based on the environment rules, guidelines and notifications named above as published in the Gazette of India, read with every amendment notified up to 3 October 2026 that the article names (consolidated reading texts from the CPCB 2021 compilation and the Goa State Pollution Control Board 2025 compilation were checked against the amending notifications), as consulted on 3 October 2026. Later amendments, CPCB guidelines, State Board orders and fees should be checked. This article is general information, not legal advice; check the official text before acting.