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Imported goods found defective and this, no consideration payable to the foreign seller, Customs - Import - Export - Customs - SEZ

Issue Id: - 116314
Dated: 23-5-2020
By:- SHIVANSH MEHRA
Imported goods found defective and this, no consideration payable to the foreign seller

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Goods were imported from China and supplied to a customer in India who in turn supplied it to a government department. But later such goods were found defective and rejected by the department and returned to the ultimate importer. Custom duties & IGST was duly paid.

Upon discussion with the Chinese supplier, they agreed with the defects and waived the consideration without return of such goods. Now, goods are lying with the importer which will be sold as scrap later.

Now, my question is whether consideration not paid/payable to the Chinese supplier will result in any kind of legal default or comolication under GST, FEMA, Customs, etc.?

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1 Dated: 23-5-2020
By:- YAGAY andSUN

Please check the terms and condition of your agreement in this regard. Since your supplier has accepted that goods were of inferior quality and having certain defects, therefore, waived the foreign remittance against such supply. On GST front, we don't foresee any issues, since goods were rejected by the ultimate user as No ITC will be available. On FEMA front, you would have to inform your Banker (AD) about such rejection of goods and waiver of payments by the foreign supplier to get its impact on IDPMS. On customs front, thought not necessary, you may send an intimation letter to show your bona fide about the whole gamut along with documentary evidences/complete chain of documents that defected goods are destroyed or sold as scrap.


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