Excise credit note support for sales returns

While carrying on business, it is common that goods sold may be rejected (fully/partially) because of excess supply, low-quality product, etc. In a normal scenario, sales returns are handled through credit note so that the ‘Net Sales’ amount will be displayed in Profit and Loss Account and the quantity returned are updated in Stock Summary.

But in the case of Excise, there are certain procedures, which need to be followed.

  • On the goods returned, it is allowed to avail the CENVAT credit under rule 16 of Central excise act 2002. These CENVAT credit availing details have to be captured in Form ER1 / ER3 and reports RG 23 Apart II and Abstract etc.
  • The Quantity returned has to be captured in a separate report called Rule 16 report. This report should capture the process details if any and clear quantity.
  • If the process amounts to manufacture, the details have to be captured in Daily Stock Register apart from mentioning the details in the above-mentioned report.


  • Currently, Excise Sales Returns can be accounted in normal Credit Note by selecting a separate Godown.
  • Users have to maintain Rule 16 Register manually. On receipt of goods returned, the details of Quantity Returned must be entered on the Receipt side of the Rule 16 Register. On the sale of such returned goods, the details have to be captured on the Despatch side of the Rule 16 Register.
  • Create a Dummy Stock Item in the Name of Finished Goods by identifying the stock as Sales Returns e.g. Cotton Cloth (sales return) with Stock Item Type as Principal Inputs.
  • To avail of CENVAT Credit on sales Returns, record a CENVAT Availing Debit Note by selecting the Dummy Stock Item created as explained in step 3. The credit availed details will be captured in row 2 or 3 (depending on the Nature of Purchase) in Table No.8 of ER1 Return.


Resolution for the above-stated problem will be provided in Tally.ERP 9 Series B JAS (July, August, September) Release.