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FAQ-20 ( Excise for Manufacturers):

How to I handle Sales Return with respect to Central Excise? 

A Manufacturer registered under Central Excise, in the normal course of business, sells Finished Goods and occasionally sells Raw Material /Capital Goods.

When he sells, Finished Goods, he will charge excise duty and is liable to pay these duties to the department. But when these goods are returned / rejected by the buyer, how can this be accounted for, and where will the returned Quantity be captured?  How will these goods be treated when they are sold or, are subjected to some process which may or may not amount to manufacture? The following procedure will answer all such questions.

A Manufacturer (Registered under Central Excise) can avail CENVAT credit on the returned goods, track the return of finished goods and reflect their return in the appropriate Excise reports.

The Rule 16 Register will capture the Quantity details of the returned goods and track the Quantity details of goods Removed As Such and the ones sent for further processing (manufacturing). As per the rule, though the goods returned belong to Finished Goods type, for the limited purpose of availing CENVAT credit, they will be treated as Raw Material.

If the Goods Returned is treated as:

-       Scrap – then no CENVAT credit can be availed on it. The amount equivalent to CENVAT will be accounted as expense

-       Usable quantity – then on the quantity designated as usable, CENVAT credit can be availed

Accounting for return of excisable goods in Tally.ERP 9

While selling the Finished Goods, the Manufacturer will record the transaction through Excise Sales Voucher Type and for the return of goods, the Excise Credit Note Voucher Type will be used.

The Excise Credit Note Voucher Type has to be created and the transaction would have to be recorded for accounting the Quantity Returned and for availing the respective CENVAT Credit.

a.     Create a new Voucher type  - Excise Credit Note

b.     Record the return of goods with the Excise Credit Note

To create Excise Credit Note Voucher Type

Go to Gateway of Tally > Accounts Info > Voucher Type > Create

  1. Enter a suitable name for the Voucher type in the Name field
  2. Select Credit Note in the Type of Voucher field
  3. Set the option Use for Excise to Yes
  4. Select the Default Excise Unit


Tally.Erp 9 : Excise for Manufacturers


  1. Accept the voucher type

To record the transaction for Sales Return

The buyer can return the goods in either of the following ways:

(i)             Through his own Invoice (i.e. the buyer would have recorded an Excise Purchase and later rejected the goods by raising Excise Debit Note)

(ii)            Through the Manufacturer’s invoice (i.e. buyer can reject the goods by sending the Manufacturer’s Invoice back along with the goods)

There could be multiple reasons for returning the goods. Few are listed below:

(i) Not as per the buyer’s specification

(ii) Buyer does not have funds

(iii) Buyer does not have space in his Godown

(iv) Goods are damaged

(v) For repair / renewal

To record sales return use the Excise Credit Note (excisable goods)

Go to Gateway of Tally > Accounting Vouchers > Ctrl + F8: Credit Note > Select Excise Credit Note

1.     In the Item Invoice mode, enter the Date.

2.     Enter the invoice number and date in the Party Invoice No: and Date fields.

Note: Enter the Voucher number of the Excise Debit Note or any other equivalent document sent with the goods returned by the buyer in the Party Invoice No field. If the goods have been returned with the manufacturers’ own invoice, leave these fields blank and enter the invoice number under the Excise Invoice Details available inside the Item Allocation screen.

3.     Select the option Goods Sold Returned the Used For field.  This flag is for capturing the values in VAT return.

4.     Select the Party Ledger in the Party’s A/c Name field.

5.     Enter the Receipt, Order and Buyer Details if any.

6.     In the Nature of Sales Return field, select the appropriate option from whom the goods are returned.

Note: The buyer or the entity who may return / reject the goods could be:

(i)             A Manufacturer registered under Central Excise

(ii)            A First Stage Dealer registered under Central Excise

(iii)           An Importer (i.e. Goods would have been exported and then returned)

(iv)           anyone belonging to category (i) or (ii) but not registered under Central Excise

7.     Select the Sales Ledger and the applicable VAT/Tax class.

8.     Under Name of Items, select the stock item. The Item Allocations screen will be displayed.

9.     In this screen,

·         Enter the date range within which the original invoice was recorded and it will display all the invoices recorded in that particular date or press Ctrl+S for selecting the Excise Sales Invoice from the Sales Register.

The selected original invoice details will be automatically captured in all the fields i.e. Cleared Quantity and Rate of Duty, etc.


Tally.Erp 9 : Excise for Manufacturers


Note: In case you do not know the Excise Invoice date, press Ctrl+S (Sales Register) to open Sales Register and choose the Excise Sales Invoice of the returned goods. You can place the cursor on the required Excise Sales Invoice and press Alt+S for selecting the sales invoice and the details of the excise invoice will be captured automatically i.e. Cleared Quantity and Rate of Duty, etc.


Tally.Erp 9 : Excise for Manufacturers


·         To select the Voucher against which the goods have been returned, press the Spacebar to select it and press Alt+S or click S: Select.

This will capture the details of the original Sales Invoice.

·         Enter the Reason for Rejection. This will be captured in the Rule 16 Register.

·         Enter the returned Quantity. The Rate and Amount will be displayed automatically. According to the condition /state of the goods, the number of goods which are usable out of the returned quantity can be entered in the Usable Quantity field. The difference will be updated automatically in the Scrap field.

Note: CENVAT Credit cannot be claimed for the quantity designated as Scrap.

10.  Select the CENVAT ledger predefined with the type of Duty as CENVAT. The Excise Duty Allocation sub-screen will be displayed.

Note: As per the rule, CENVAT credit can be availed to the extent of the same percentage of duty charged at the time of sales. However, if the user wants to change theRate of Duty while recording Excise Credit Note, he or she can specify the required Rate of Duty inside the sub-form which opens on selecting the CENVAT ledgers.

The assessable amount, calculated based on the Usable Quantity and Rate of Duty will be displayed.


Tally.Erp 9 : Excise for Manufacturers


11.  Select the Education Cess ledger predefined with the Type of Duty CENVAT. The Excise Duty Allocation sub-screen will be displayed. Press Enter in each field to return to the voucher entry screen.

12.  Select the Secondary and Higher Education Cess ledgers predefined with the Type of Duty as CENVAT. The Excise Duty Allocation sub-screen will be displayed. Press Enter in each field to return to the voucher entry screen.

13.  Accept to save the Excise Credit Note.

Returned goods so recorded will be considered as Raw Material for the limited purpose of availing CENVAT Credit and hence will not reflect in the Daily Stock Register. The details of returned goods will be captured in Rule 16 register and RG 23 Part I report.

Sale of the returned Goods

Sale of returned goods can be either:

·         When the returned goods are subjected to a process which does not amount to Manufacture or the returned goods are sold As Such (No Manufacturing Process Involved - Removed As Such) Or

·         When the returned goods are subjected to process which amounts to manufacture (Sale of  Returned Goods after Manufacturing or Re-processing)

For more information on recording sales transactions for returned excisable goods, refer to reference manual.

The Rule 16 Register is provided to track the sales returns of excisable goods and goods sent for further processing (manufacturing), resale of goods (Removal as such) etc. The information captured in this register is similar to that of RG 23A part I.

To view the Rule 16 Register:

Go to Gateway of Tally > Display > Statutory Reports > Excise Reports > Manufacturer > CENVAT Registers > Rule 16 Register


Tally.Erp 9 : Excise for Manufacturers


The information in Rule 16 Register is divided into two sections – Rejection Invoice Details and Action taken on the rejected stock.

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