Sales Return with respect to Central Excise (for Dealer)

[nihal maner]

Sir,

I am a Excise dealer and sold material through excise invoice (First stage dealer), Now my part material is rejected by customer (he is also dealer) and he will return the material (part material).

In this stage how can he return the material. (we dont want second stage dealer invoice from him)

Please suggest

[Rajagopalan Ranganathan]

Sir,

If the goods supplied by dealer are rejected by the customer, these can be resold under fresh invoice. the dealer should approach jurisdictional Range Superintendent with original cenvatable documents issued in the name of first customer. The Range Superintendent will cancel the same and allow dealer to issue fresh cenvatable invoice in the name of another customer. The entry made in R.G. 23 D Register relating to the invoice issued to the first customer shall be cancelled (Authority: Pune Commissionerate Trade Notice No. 18/97 dated 11.2.1997). These instruction still hold good till the instructions are withdrawn. However I have my own doubt whether officers in the jurisdiction of other Commissionerates will accept this instruction. This is in respect of full consignment rejected. If part consignment is rejected then you approach your jurisdiction Range Officer to find out a solution.

[KASTURI SETHI]

Only intimation to the Range Officer is sufficient. Accountal should be proper. Records should be proper. Books of accounts must show return of goods and redespatch of same.

[Rajagopalan Ranganathan]

Dear Kasturi Sir,

If the customer is manufacturer then if he returns the goods either wholly or partly he can do so under his invoice and the dealer can take back the credit in R.G. 23 D Register. If the customer is either a first stage or second stage dealer how the dealer who is receiving the rejected goods can take the credit because while returning the goods can the dealer issue a cenvatable invoice to another dealer. This is question the quriest wants an answer. I feel there is no remedy either under Cenvat Credit Rules, 2004 or Central Excise Rules, 2002.

[KASTURI SETHI]

Sir,

Credit reversed is equal to "not taking credit taken". Moreover, Registered dealer is just to pass on credit to their buyer. He is not to exceed the quantum of credit recorded in the register. There is no valuation issue, no manufacturing, nothing like availing and utilizing credit. No risk of revenue loss, if proper accountal is made. Invoice should not be fake. Credit reversed is equal to not taking credit taken

[KASTURI SETHI]

Cancelled bill and intimation to Range Officer with original and duplicate copies of invoice implies auto reversal of credit passed on which was not actually passed on to the buyer due to rejection of goods. Trade Notice is based on Board's Circulars and Board's circulars have no statutory force at all. Should the registered dealer be allowed to suffer on the ground that there is no remedy in this aspect ? Basic fundamental is that the dealer has paid CE duty and he has proper stock of duty paid goods. Stock of duty paid goods should always tally with quantum of credit lying in his RG-23 D register. When stock tallies with the balance of cenvat credit, no body can deny credit on any ground. Dealer cannot be made victim of procedures causing monetary loss without any fault of his. Rules/procedures have been framed for the welfare of the public and not for harassment. There should be no fraud like non-existence of dealer or buyer or fake invoice etc.

There is a plethora of judgements various courts wherein it has been held that credit reversed amounts to credit not taken. Returned goods mean credit was not passed on to the buyer by the dealer. Hence intimation to the department is sufficient. There is no utilization of credit by the dealer. Being dealer, he cannot utilize credit but can only pass subject to proper accountal of stock viz-a-viz cenvat credit.

2011 (266) E.L.T. 41 (Guj.) = 2010 (12) TMI 389 - GUJARAT HIGH COURT COMMISSIONER OF C. EX. & CUS., VADODARA-II Versus DYNAFLEX PVT. LTD.

AI Summary

Return of Duty-Paid Goods: reselling permitted after cancellation of original cenvatable invoice with credit reversal/accountal. Where goods supplied by a dealer are rejected, the dealer may resell them under a fresh cenvatable invoice after the jurisdictional Range Superintendent cancels the original cenvatable documents and the corresponding register entry; alternatively, intimation to the Range Officer with proper accountal and books evidencing return and redespatch may suffice because credit reversal is treated as credit not taken, provided stock of duty-paid goods reconciles with cenvat credit and there is no fraud.