EXCISE RULES REGARDING SALES RETURN

Returned goods under Central Excise are to be operated under the provisions of Rule 16 of Central Excise Rules,2002. In terms of this rule, if the duty paid goods are returned to the factory for whatsoever the reason, the entry of the goods should be separately shown in the Daily Stock Account as returned goods. They should be treated as ' Inputs' for all purposes. You should avail the input credit like other inputs basing on the invoice issued by your customer or on your own invoice. If the goods which are returned are subjected to sale again without undergoing any process then you have to reverse the equivalent credit availed at the time of return. If they have been subjected to any process which amounts to manufacture, then you are at liberty to pay the duty as per the transaction value. Presently no refund mechanism is there for the returned goods. Instant credit is available in the form of inputs. In case, the goods are not accompanied by any of the documents, then only you have to rush to the superintendent of central excise under the provisions of 16(3) of Central Excise rules,2002.

Dear Sir,

Are the same rules still valid ?

Because according to my ERP service provider, they say after 2004 the rules have been changed, it should be treated in RG1 as Finished Goods.

Thanks for your support.

Yes,

If the goods returned in factory for remade, repaired, recondition or any other reason in factory, it shall be deemed input and it should be taken in input register like input. The procedure is prescribed in rule 16 of Central Excise Rules, 2004.

Thank you very much sir for the clarification.

Also, my next concern is, in our ERP when we tag this item code for sales return, it will be taken as a finished good only. Then it will hit RG1. Otherwise we will not be able to track, which grade was returned & on which date & against which bill. How to solve this problem ?

Dear Sir,

I am not able to advice you in regard to ERP System. But the law remains same, you have to enter sale return goods in the input register if the same has been return for the purpose of reprocess.

However in that situation you should maintain one CENVAT register electronically. Because it is not at all finished goods.

At present return goods are taken back in RG-1 (finished Goods Daily Register). Similarly take this item in your Fiinished Goods Register in ERP.