Document for Purchase Rejection
Suhas M Deshmukh
(Querist) 13 September 2010
This query is : Resolved
Respected Experts
Please guide me what type of document should be generated for sending excisable purchase rejection back to the supplier?
Under the excise invoicing rules we should remove any excisable goods outside the factory on "Invoice only". But out Mvat consultant insist on generating "Debit Note" instead of tax invoice.
Secondly if send purchase rejection to OMS supplier what is about CST and C Form? Whether we should obtain a C Form from the counterpart or issue a C form for net purchase value i.e. after deducting purchase return value?
Please reply ASAP
Regards
B.R. BHALLA, ADVOCATE
(Expert) 13 September 2010
In my opinion, you raise an Exciseable Invoice in respect of goods "rejected and returned to the supplier". Instead of crediting this sales to the Sales account, please credit the same to Purchase A/c, which is debit account. Since this is only rejection of goods, there is no need to reflect in Sales Returns.
There is Madras High Court judgement, in which the Hon'ble High Court has made a distinction between " Rejection and Return of goods". It has been held that whereas the Return of goods is as a result of bilateral agreement between the parties, the rejection of goods is a unilateral act of the buyer, who is competent to reject the goods on ground of specifications and poor quality leading to rejection of goods. While all VAT Act provide period for Return of goods, there is no specific period of Rejection of goods and can be claimed by the supplier from sales of the relevant year, if the assessment has not been completed until then.
s.subramanian
(Expert) 14 September 2010
Mr.Bhalla is right. I agree with his view.
Suhas M Deshmukh
(Querist) 15 September 2010
Thanks a lot Mr Bhalla and other experts. But my one query remains unsolved. What about OMS Purchase return and C form. Whether we should obtain C Form from the supplier for the value of purchase return or we have to issue C form for net purchase value i.e. after deduction of purchase return value?
And secondly as we include the CST on purchase in purchase value what about CST payable on the purchase rejection invoice? Whether we have to pay it or reduce it from the purchase?
Please reply ASAP and oblidge
R.Ramachandran
(Expert) 16 September 2010
Dear Mr. Deshmukh,
1. When you return the goods to the manufacturer, you have to return the original excise invoice, only then the manufacturer would be able to take cenvat credit of the duty paid earlier, under rule 16 of the C.E.Rules.
2. While returning the goods, you have to raise the debit note on the original supplier. The debit note may be for the amount (original invoice price, inclusive of the CST paid thereon, if there is proper agreement to the effect then the charge incurred towards to and fro freight).
3. For transportation of the goods from the place of rejection to the original supplier, necessary delivery challan completely describing the goods and also indicating the Invoice No. under which it was originally received.
4. Copy of the original commercial invoice.
5. In terms of Section 8A of the CST Act, the goods have to be returned within six months from the date of delivery (so that the original supplier would get adjustment of the CST paid at the time of assessment).
6. Outward Waybill of the transporter.
7. There will not be any requirement for Form-C, as you are not selling the goods.
8. If there is any requirement for in-ward way bill, the same has tobe obtained from the original supplier and sent along with the vehicle carrying the goods.
