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Payment against Challan instead of Invoice

Vijay Kr. Mishra (prop.) (576 Points)

11 June 2009

Mr. X (seller) issuing Challan against his Sales, instead of Sales Invoice to Mr. Y (purchaser).

Can Mr. Y make Payment against that Challan.

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Sourabh Sharma (CS CA (Final) M.com NCFM Derivative Capital Market Mutual Funds) (771 Points)
Replied 11 June 2009

Its a general business practice, that, in case of emergency or in some other case, we sell goods temporarily to the customer with whom we have good business relation. The Bill/Invoice is prepared on a future date but we send a challan with the goods as a proof of goods sent. Such types of transactions are called Sales By Challan.
Sales By Challan is an agreement to sell the goods in which property/ownership of the goods is not passed to the buyer till an Invoice is prepared. The customer has only the possession of the goods but he is not the owner of the goods.
It shows the quantity, rate and other details of goods sent to the customer.
Before closing the year, you will be required to prepare bills from challans. You can not have any challans for which bill is not made.