Post-import retail price revision cannot justify differential customs duty where the importer cleared goods on the declared price.

Differential customs duty could not be fastened on an importer merely because authorised dealers later revised the retail sale price after import and clearance of the watches. The goods had been assessed on the declared retail sale price at import, and there was no evidence that the importer altered, tampered with, or knew of any later price change in the dealers' stock. The retail sale price valuation mechanism under section 3(2) of the Customs Tariff Act, 1975, section 4A of the Central Excise Act, 1944, and rule 5 of the 2008 Rules was therefore inapplicable. A statement under section 108 of the Customs Act was also insufficient without section 138B compliance, and the penalty under section 114A could not survive once the duty demand failed.

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Issues: Whether differential customs duty could be demanded from the importer on the basis of an upward revision of retail sale price made after import and clearance of the watches by authorised dealers, and whether the consequential penalty could be sustained.

Analysis: The watches were assessed and cleared on the retail sale price declared at the time of import. The record did not show that the importer altered, tampered with, or had knowledge of any later alteration of the retail sale price in the stock held by authorised dealers. Once the goods were sold to the dealers, the importer had no control over subsequent pricing by them. The machinery of retail sale price based valuation under section 3(2) of the Customs Tariff Act, 1975 read with section 4A of the Central Excise Act, 1944 and rule 5 of the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 was held inapplicable to fasten liability on the importer for a later revision by dealers. The statement recorded under section 108 of the Customs Act, 1962 was also not treated as sufficient, particularly in the absence of compliance with section 138B of the Customs Act, 1962. As the duty demand itself failed, the penalty under section 114A of the Customs Act, 1962 could not survive.

Conclusion: The demand of differential duty was unsustainable and the penalty was not maintainable; the appeal succeeded.

Final Conclusion: The order confirming differential customs duty and penalty was set aside, and the importer obtained complete relief.

Ratio Decidendi: A post-import upward revision of retail sale price by authorised dealers cannot, by itself, justify differential customs duty from the importer where the importer cleared the goods on the declared price at import and no evidence shows alteration or knowledge by the importer.

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