Valuation of Sales Return

[JOHN SHANNEL]

Ours is a snacks co. The Sales returns is almost 4% of our sale. Our Price list for our products keeps on changing atleast once in a month. We receive sales returns from our distributors. We value our stocks approximately since we do not have any record on which price it is sold. Is it right. Is there any case law.

[Snehal Kulkarni]

Dear Mr John

For Sales Return, the detail guideline are given in Rul 16 of Cntral Excise Rules 2002.

1. You have to kept the Sale Return in separate identified are and after receipt you have to intimate to the Jurisdictional Excise Office.

2. You have to maintain separate Register ( Form V) for this. After receipt you have to account in this register. If the Officer doesnt inspect the sales return within 24 hr of the intimation, then the receipt goods may be transfered for reconditioning or similar activity.

3. If you have avail the Cenvat Credit on these goods, then at the time of removal the same amount of cenvat credit to be passed.

4. You may sold the goods at higher or lower price. If goods sold at higher price, pay the duty on the transaction value.

If the goods are sold at lower price, then pass the equivalent credit which was taken at the time of receipt.

 

[JOHN SHANNEL]

Sir thanks for you reply. but the goods received are not sold infact it is of no use ( Since it is snacks) so it is destroyed. We value the goods and deduct from the sales.

We also do not pay excise duty.

Please advice on this whether there is any issues in valuation of our Sales return.

Sales       XXXX

Less:

Sales return XX

Net Sale    XXXX

[Snehal Kulkarni]

Dear Mr John

In our view, since these sales return are not marketable, you may ask remission of Duty Paid u/r 21 of CCR 2002.

In case of replacement against these sales return, you have to pay the Duty as per the pervailing rate only the VAT/CST will not be applied since this is not the sale.

Payment of Excise Duty is mandatory at the time of removal.

 

 

AI Summary

Valuation of sales returns: adjust Cenvat credit and notify excise; remission possible for unmarketable goods, duty on removal. Sales returns must be segregated, recorded in Form V and notified to the excise office; if not inspected the goods may be reconditioned. Cenvat credit taken on returned goods must be adjusted on removal: pay duty if resale is at a higher price, reverse credit if at a lower price. Unmarketable returned goods may qualify for remission of duty; replacements are treated as removals subject to excise duty, with duty payable at removal and VAT/CST not applicable.