"In QC" lists purchased items that are awaiting incoming quality inspection. Items that are set up (in IN-B) to require incoming inspection go into QC as they are received and must be processed (bought off) in the QC module (PO-J).
 
 
You might consider creating a separate location in IN-L-B where you can transfer (IN-L-M) your rejected stock. Name it REJECTS or some such so that it is obvious. You can even make the location type non-stock, so that items in there do not show up in inventory inquiries, especially from the SO module and WO module.