Finished goods sent out to vendor on challan without invoice

Dear all,

I have a query.

In our company we have an issue , out stores department is sending out finished goods to vendors on challan basis without invoicing them in case if any product sent out earlier is found not working due to manufacturing defect. I have raised a objection to it that it cannot be done. 

What is the problem ( statutory and accounts point of view ) in sending finished goods with challan ? I knew its a statutory loophole.