CESTAT Delhi Overturns Penalties and Confiscation on Imported Watches

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 15.04.2026

CESTAT Delhi Overturns Penalties and Confiscation on Imported Watches

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Richemont India Pvt. Ltd., a prominent distributor of luxury watches in India, recently faced a significant legal challenge regarding customs duty, confiscation, and penalties imposed by customs authorities. This article provides a detailed overview of the case, the arguments presented, and the final decision by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi.

Background of the Case

Richemont India Pvt. Ltd. imports and sells watches from renowned brands owned by the Richemont group. The company acts as the authorized distributor in India, selling imported watches to unrelated authorized dealers on a principal-to-principal basis. Once sold, Richemont claims it has no control over the dealers’ operations, including pricing decisions.

The Dispute

The Department of Revenue Intelligence (DRI) initiated an investigation based on intelligence about imported watches. During searches at authorized dealers’ premises, it was discovered that:

• MRP (Retail Sale Price) tags on some watches had been changed.
• Some watches lacked MRP tags altogether.
• MRP printing machines and unprinted tag rolls were found, suggesting possible manipulation of price tags.

The DRI alleged that Richemont India revised the RSP (Retail Sale Price) upwards after import, but did not pay the corresponding differential Countervailing Duty (CVD) on the revised prices. The department argued that under section 4A of the Central Excise Act and related rules, the revised RSP should be used for CVD assessment.

Show Cause Notice and Adjudication

A show cause notice was issued to Richemont India, proposing:

• Assessment of CVD based on the upwardly revised RSP.
• Demand for differential customs duty of Rs. 4,47,394/- plus interest.
• Confiscation of watches and imposition of penalties under various sections of the Customs Act.

The Joint Commissioner upheld the department’s position, confirming the demand, confiscation, and penalties. Richemont appealed, but the Commissioner (Appeals) also upheld the order.

Arguments Presented

Richemont India’s Defense

• Correct Duty Paid: Richemont argued it paid the correct CVD at the time of import based on the declared RSP.
• No Control Over Dealers: Once watches were sold, Richemont had no control over subsequent price revisions by dealers.
• Legal Precedents: Cited cases where importers were not held liable for post-import price changes by dealers.
• No Evidence of Tampering: Claimed no evidence showed Richemont altered or had knowledge of MRP changes.
• Penalty Not Justified: Argued penalties cannot be imposed without evidence of willful suppression or intent to evade duty.

Department’s Position

• Revised RSP Originated from Richemont: Internal communications and price lists showed Richemont circulated revised prices to dealers.
• Duty Short Paid: The revised RSP applied to unsold stock, making differential CVD payable.
• Suppression of Facts: Richemont failed to disclose the possibility of RSP revision at import, justifying penalties and extended limitation period.

Tribunal’s Findings and Decision

The Tribunal carefully examined the evidence and arguments:

• No Evidence of Richemont’s Involvement: There was no proof Richemont altered or had knowledge of MRP changes after selling watches to dealers.
• Legal Precedents Support Richemont: The cited cases confirmed that importers are not liable for post-import price changes by unrelated dealers.
• Statement of Director Not Sufficient: The director’s statement was not considered relevant as proper legal procedures were not followed.
• Demand and Penalties Not Justified: Since the demand for differential duty was unsustainable, penalties under section 114A could not be upheld.

Final Order

The Tribunal set aside the impugned order, allowing Richemont India’s appeal. The demand for differential duty, confiscation, and penalties were not sustained.

Conclusion

This case highlights the complexities of customs duty assessment for imported goods, especially when pricing changes occur post-import. The Tribunal’s decision reinforces the principle that importers cannot be held liable for price revisions made by unrelated dealers after the goods have been sold. It also underscores the importance of clear evidence and proper legal procedures in customs disputes.

Source: CESTAT Delhi

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