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Return Material Accountablity

Sachin Adsul (HOD Excise dept) (178 Points)

09 March 2009

i have one question regarding Sales Materials return in Factory,

Question:- some time material return to facory because of cancel of order, or material not match with coustomer specification that time we treat it as a Rejection Materials & taking in rejection Account but after some days material was re issue without any processing activity that time we have no problem with transaction but if material send after process then that time what will we do for overwritten of material in RG-1 please anybody send me actual procesure for removing this type of material

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11 Replies

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 09 March 2009

When the material comes back- take credit under Rule 16. If you are maintaining RG23 part I, enter into that. When the material go as it is, revrse the credit taken. It is removal of inputs as such. If the material is processed amounts to manufacture, take the goods into RG-1 and pay duty.

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Sachin Adsul (HOD Excise dept) (178 Points)
Replied 10 March 2009

*Originally posted by :*Rajesh Kumar
"	When the material comes back- take credit under Rule 16. If you are maintaining RG23 part I, enter into that. When the material go as it is, revrse the credit taken. It is removal of inputs as such. If the material is processed amounts to manufacture, take the goods into RG-1 and pay duty.	"

Thanks for your reply but give me clerification if we process on sales return material that time production effect take two time in our RG-1 that time our stock were more by actual stock.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 14 March 2009

No. It will not happen.

Say your RG1 stock is 100. You cleared 10. You are left with 90.

Say out of 10 pieces cleared, 5 is returned. You will take credit of these 5 pieces in RG32A part II and if you are maintaining part-I also, you will take the material in part-I as input.

Afetr production, if the process amount to manufacture, you will take 5 pieces in RG1. your Rg1 staock is now 95. this is same as actual quantity. The problem will arise if you take the returned pieces in RG1. Retirnes pieces are deemed input and not final products, under rule 16 of the Central Excise Rules. On this issue one of my paper was pulished in the name of "Interpretation of Rule 16" [2007 (216) ELT A70]. You can refer to the paper.

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Sachin Adsul (HOD Excise dept) (178 Points)
Replied 16 March 2009

Originally posted by :Rajesh Kumar
"	No. It will not happen. Say your RG1 stock is 100. You cleared 10. You are left with 90. Say out of 10 pieces cleared, 5 is returned. You will take credit of these 5 pieces in RG32A part II and if you are maintaining part-I also, you will take the material in part-I as input. Afetr production, if the process amount to manufacture, you will take 5 pieces in RG1. your Rg1 staock is now 95. this is same as actual quantity. The problem will arise if you take the returned pieces in RG1. Retirnes pieces are deemed input and not final products, under rule 16 of the Central Excise Rules. On this issue one of my paper was pulished in the name of "Interpretation of Rule 16" [2007 (216) ELT A70]. You can refer to the paper.	"

Thank you sir.

Ram kr. (Buisness) (883 Points)
Replied 20 March 2009

Dear Sir,

Please clerify above two line in which you have used RG1. two times.

1. you will take 5 pieces in RG1.your Rg1 staock is now 95. this is same as actual quantity.

2.The problem will arise if you take the returned pieces in RG1.

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Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 21 March 2009

Actually the material, which is returned is finished goods of the unit. Hence, many persons feel that on return of material, such material should be entered in the RG-1 register.

However, in law, the returned material is a deemed input under Rule 16, and hence it should not be entered into RG-1. Hence, the returned material should be entered into input register, i.e. RG23A part1.

Tushar Joshi (Service) (34 Points)
Replied 25 March 2009

But How you should make the treatment when material is not rejected but returned back as it is as currently there isn't any requirement of part supplied due to sudden change in production plan of customer ? Customer returns the material from the gate only with out any entry saying material is not required now but will be required laterly . Also customer is not able to state when the requirement for said material will rise.

What we should do in such case ? Please Clarify.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 25 March 2009

Material returned on any ground is a demed input. Take credit on return. You can clear this material to any person, including those who return. At the time of clearance (it will be clearance of inputs as such), reverse credit taken at the time of such return.

RAMESH.B.B (Manager - Finance) (22 Points)
Replied 14 December 2009

I need format of Annexure 19 ( Statement regarding export of excisable goods withour payment of duty )

Rajeev Nair (Finance Professional) (510 Points)
Replied 15 December 2009

Hi- I completely agree to views of Rajeshji on this thread- except a confusion as i had practical experience on this subject -

Ok, that we consider rejected/returned material as deemed input and enter the same to P-I

My question why the question of reversal of Duty arises. As ours was a PAINT Mfg.Co, we always used to get returned materials from Distributors due to XYZ reasons but not on Quality Grounds....ha..ha.. We used to take the same into PART-I, reprocess if needed and again there's a Sales transaction paying Duty on It. Please clarify...

MR.Ramesh B.B.

Annexure-19 enclosed as attachment

Attached File : 19 annexure 19 blank .xls downloaded: 262 times

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C Suresh Krishna (Sales Tax & Excise Professional) (51 Points)
Replied 02 July 2010

Originally posted by : Rajesh Kumar
	Material returned on any ground is a demed input. Take credit on return. You can clear this material to any person, including those who return. At the time of clearance (it will be clearance of inputs as such), reverse credit taken at the time of such return.

Dear Sir,

If our customer rejected the material and same was sold another customer without any further process on it .This will enter in Daily Stock Account / RG23AP-1 . My opinion is it will be entered in DSA (Daily Stock account)