definitions of credit note - Indian Laws - General

Definitions of credit note According to various dictionaries and references, definitions of credit note are as follows: In P. Ramanatha Aiyar, Advanced Law Lexicon, 6th Edition, Volume 1 Credit Note is defined as- A note showing that an allowance is to be made for shortage or defects in goods supplied and returned to sender, or for overcharge in price. The term is also used for a note or document that confirms the availability of funds for future purchases (as when goods are paid for but later returned to the supplier) . A sales credit note is defined as Note sent from a seller to a buyer to cancel (partly or in total) a charge that has already been invoiced. The credit thus granted can be offset against the cost of future purchases (and is, therefore, from the seller s point of view, better than making a cash refund . According to the Oxford Advance Learner s Dictionary if, damaged items have to be returned, the manufacturer may issue a credit note . According to the Cambridge Advanced Learner s Dictionary and Thesaurus A credit note is an outstanding amount, to be used when needed. It is the document that a seller gives to a buyer who returns a product, which the buyer may use at a later date/time to pay for something else . According to the Collins English Dictionary A credit note is a piece of paper that a shop gives when a person returns goods that have been bought from it, which entitle the buyer to take goods of the same value without paying for them . According to Black s Law Dictionary, Fifth Edition, - Credit Memorandum is a document used by a seller to inform a buyer that the buyer s account receivable is being credited (reduced) because of errors, returns, or allowances . Under the Goods and Services Tax Law It has been stated that after the invoice has been issued there could be situations where the quality of the goods or services or both supplied is not to the satisfaction of the recipient, thereby, necessitating a partial or total reimbursement on the invoice value. In order to regularize these kinds of situations the supplier is allowed to issue what is called as credit note to the recipient. Once the credit note has been issued, the tax liability of the supplier will reduce. The credit note is, therefore, a convenient and legal method by which the value of the goods or services in the original tax invoice can be amended or revised. The issuance of the credit note will easily allow the supplier to decrease his tax liability in his returns without requiring him to undertake any tedious process of refunds. A credit note is a valuable consideration which is essentially a document to inform a buyer that the buyer s account is being credited because of errors, returns or allowances. On discharging his obligation under the warranty appended to a sale of an automobile, a dealer receives a credit note. This would be a receipt in the account of the dealer and a liability in the returns of the manufacturer which may ultimately enable the manufacturer to decrease his tax liability. Consequently, the dealer of the automobile in whose account a credit is shown would be ultimately a recipient of a valuable consideration on account of a transfer of goods, namely, spare part by a dealer to a customer while discharging his obligation under a warranty and thereby receiving a valuable consideration for the spare part used by the dealer from his stock from the manufacturer in the form of a credit note. When the entire transaction is viewed in the aforesaid perspective and in juxtaposition with the expression sale under the Central Sales Tax Act as well as the respective State enactments under consideration which is of a wider connotation than the definition of sale under the Sale of Goods Act, we hold that the amount shown in the account of the dealer in the form of a credit note is nothing but a price received for a sale of a spare part by the dealer which is from his stock and which belongs to him. ........... [M/S. TATA MOTORS LTD.- 2023 (5) TMI 744 - SUPREME COURT]