When is a check considered to be deposited?

When you accept it for deposit to your customer's account.

Here is the scenario. Our customer agreed to sell some livestock to another person. That person wrote our customer a check, but has not taken possession of the livestock. Our customer came to the bank, wrote "for deposit only" on the back of the check and deposited it. About an hour later he came back to the bank and ask for the deposit back, he had changed his mind. The deposit slip and check were given back to him. They were never part of the bank's cash letter. Now the other person in claiming that the check was deposited.

If, indeed, the check was not processed, you should be able to demonstrate that it was not credited to the payee's account. You can also demonstrate that it has not yet been run through a proof & transit routine (not indorsed by the bank, not amount-encoded).

Sounds to me that the drawer of the check is being a bit pig-headed.