Can we Export against the rejected material on FOC basis

[Asked by Guest]

Dear Sir,

We had exported some goods under LUT and we received the payment for the same. But after some months the customer raised question that our material are rejected so they want same quantity of material replacement on FOC basis. We don't bring material back to our factory from the customer because these material are not good and also transportation cost will be high compare to this material.

My query is can we send these replacement material to customer on Free of cost basis under LUT.

and the above transaction which we takes place for replacement is correct or not ?

Regards

Swapneswar Muduli

AI Summary

Free of cost export of replacement goods requires valuation, ARE1/invoice disclosure and GR waiver under realisation rules.
Replacement shipments may be exported as Free of Cost where original exports were under LUT; exporters must state free supply on ARE 1 and invoices, adopt a defensible valuation for non sale transactions, and comply with foreign exchange realisation or GR waiver procedures and related reporting requirements to satisfy authorities.