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On the other hand, if you're a live German frogman who's just been pulled out of the water by a bunch of grumpy-looking blokes with rifles, you're not really going to be in any position to complain about them taking trophies. In that context the marking of the caseback seems plausible, if only to claim the watch?
Setting the authenticity of the watch aside, that's an interesting story; I'd not realised that German combat divers had been active in (more or less) inland Europe after D-day.
'It was brought back to Britain by an English soldier at the end of the war, after the watch came into his care following the Battle of Nijmegen in 1944.'
Took it from a body or a POW?