I have created a policy to block any tagged files in the email protection rule. The problem is that I want to exclude specific domains from this rule like emails sending to example.com shouldn't be blocked but block to all other domains. Moreover, email protection rule is not storing evidence while all other rules are working fine with the evidence.
You will need to go to the exceptions tab in your email protection rule and create a new exception rule there. You can create a new email definition here and specify the domains you would like to exclude.
As far as the evidence issues go - either the rule does not have evidence collection enabled or possibly you have a corrupt rule altogether. It is very unlikely that evidence collection would function for all other rules and not function for specific ones.