Sales return by EOU - procedures

[venkat eswaran]

Dear All,

We have supplied to EOU unit under CT-3 without payment of Excise duty. Due to quality problem they are [ EOU unit] rejected the matl. Now what documents they have to raise for goods return back to us?

What procedure we have to follow after reaching the rejected matl. Whether we need to inform our Excise range about this. etc., Pl share your valuable views

thanks in advance

Venkat

[KASTURI SETHI]

Sh.Eswaran Ji,

Goods cleared to EOU are to be treated as deemed exports. You are required to intimate about receipt of finished goods (defective) back. EOU would raise invoice mentioning all the particulars i.e. original invoice no. date etc. What are the goods ? Whether these are repairable ?

[venkat eswaran]

Dear Sir,

thanks for your reply. The goods are paints and repairable .

Sir, actually, we have already received the Re-wearhousing certificate from that customer. After that only they rejected due quality issue. Whether that EOU customer has to raise any ARE3 forms to us for returning the goods along with their invoice. pl give some more clarity

Venkat

[KASTURI SETHI]

In my view, ARE.3 is not required to be attached with invoice by EOU only invoice is sufficient.

[Rajagopalan Ranganathan]

Sir,

If the EOU had procurred the excisable goods without payment of duty under Notification No. 22/2003-CE dated 31.3.2003 then EOU can return the defective goods under its invoice after giving intimation to Central Excise Officer in charge of EOU. If EOU procure the excisablr goods from DTA unit on payment of duty then EOU can take the credit of excise duty paid on such goods. If EOU return the said goods as rejects then the EOU has to reverse credit already taken and return the goods under its invoice.

[KASTURI SETHI]

Sh.Venkat Ji,

I endorse the views of Sh. Ranganathan, Sir. I further add that otherwise also A.R.E 3 is not meant for return of goods. If we go through the title of ANNEXURE-25 it reads as under:-

"Application for removal of goods from a factory or a warehouse to another warehouse"

You are return the defective to a factory and not a warehouse. Hence ARE-3 is not required to be attached.

[Suryanarayana Sathineni]

Dear Friend,

With due respects, I differ with the views expressed by my learned friends with regard to return of the rejected goods by EOU which were procured under CT3 for the following reasons:

1. Earlier, under Notification No. 22/2003-CE, it was provided that while procuring the goods duty free, the USER INDUSTRY. follows the procedure prescribed under " Removal of Goods( under concessional rate of duty) Rules,2001 with a modification that in place of Anexure-! appended to the said rules, CT3 to be used.

2. In terms of Proviso to Rule 6 of the said Rules, the user Industry (EOU) can return the obsolete or defective goods to the original manufacturer, without payment of duty subject that the original supplier should account the said returned goods in their RG1/Daily Stock Account as non duty paid goods with an intimation to their Jurisdictional excise Authorities.

3. The above provision in the said Notification was omitted during 2007 ( as per my remembrance) and from then onwards, while returning any such rejected goods to original manufacturer, the EOU has to pay duty by raising an invoice and there is no such provision of return the goods without payment of duty under AR3A.

Hope this answers your query.

Best Regards

Suryanarayana

AI Summary

Return of defective goods by EOU requires invoice and excise intimation; duty payment or reversal of credit follows. EOU returns of defective goods require the EOU to raise an invoice citing original invoice details and to notify the Central Excise officer; if goods were procured under a concessional duty-free scheme earlier returns could be effected without duty subject to accounting and intimation but amendments removed that accommodation and returns now generally attract duty, while goods procured on payment require reversal of any excise credit upon return. ARE 3 is not required for returns to the factory.