GIVEN BY GHOSTS

The world of liquor business is quite murky to say the least. The law restricts import, sale and consumption of liquor here in Bangladesh. But in reality, there is no short supply of alcohol in bars and clubs as the illegal liquor market booms. What is their source then? In a long investigation, The Daily Star's Sohel Parvez, Martin Swapan Pandey, Zyma Islam, Mohammad Suman and Shamiul Hossain unmask parts of the illegal trade. Today, we are running the first instalment of the two-part series.  

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Call it a puzzle?

The bar of the club bustles with members, merrily drinking away the night. Expensive whiskey and wine bottles glisten on the bar cabinets -- Glenfiddich, Glenlivet, Blue Label, you name it. At least three kinds of beer invitingly chill in the freezer.

Nothing wrong in it. Except, the club did not officially import or purchase any of them. They are all crops of a clandestine liquor business that is thriving in the country abusing the duty-free imports for diplomats and through smuggling, taking advantage of a restrictive and high tax policy. 

The absurdly high tax on liquor, as much as 605 percent, does not achieve any of the aims of the government. Neither does it restrict sales nor does it earn the government any import duty as almost the entire business is run illegally. 

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Keep reading - Out of watch with legal shield

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An investigation by The Daily Star has unmasked parts of the illegal trade. But much remains behind the closets as people involved in the trade right from the bonded warehouses to customs officials to foreign ministry officials to the club owners refuse to divulge information.

However, what has been gathered since February this year is enough to prove the illegal liquor business run by an oligarchy comprised of some top businesses.

PURCHASE NIL, SALES TK 6.5 CRORE

In 2016, the narcotics department demanded an answer to a puzzle from four top social clubs spread over the posh areas of the capital.

"Analysing relevant documents and records, we can see that you have neither imported nor purchased any alcohol since obtaining the licence. Even so the club routinely serves alcoholic drinks to its respected members. It is puzzling how the club is serving alcoholic drinks to its members," reads the letter dated September 24, 2016, to a prominent club.

The club in question obtained its bar licence in 1982 and did not have an import licence when the narcotics department issued the letter.

This means, the club could buy foreign liquors only from the Parjatan Corporation, the official importer who can sell to others. But Parjatan's sales data for 2015-2017 show it did not.

In separate letters issued between April and September 2016, the narcotics department, which is under the home ministry, brought similar charges against the three other clubs. They did not import or buy any liquor from Parjatan for between three and nine years.

The department asked the four clubs to explain their operations and reveal the source of their liquor.

The Daily Star has been able to obtain the response of only one club.

"Our foreigner members bring their own liquor to drink on the club premises … Also, we bought 64.5 litres of liquor from Carew and Co [the only state-owned liquor producer and exporter] around August/September of 2014 to serve our guests," it wrote in a letter dated April 17, 2016.

It is an astonishing claim. The club's own annual reports show it made over Tk 46 lakh from bar sales from October 2015 to June 2017.

Last night, a 750ml bottle of Carew's liquor was selling at Tk 1,800. It's beyond imagination how the club could make so much money from bar sales when it had just 64.5 litres of the local brand.    

The Daily Star team has visited the club at night and found hardly any foreign members. Local members crowding the spacious bar had been found drinking foreign alcohol and beer. Not a single member has been found drinking Carew brands.

In a raid on July 9, when this investigation was underway, the Customs Intelligence and Investigation Directorate (CIID) seized 3,000 bottles of foreign liquor of different brands, worth around Tk 5 crore, from this club.

Another club's bar sales were Tk 11.5 crore in two years -- 2015-16 and 2016-17. It did not import a single bottle from 2013 to 2016, making its liquor source very obvious. The club's last import was worth $7,826 in 2012. 

Sales data of the two other clubs were not available.

Oddly, while clubs and bars are logging tens of crores of taka in sales, their total alcohol imports are a drop in the ocean.

In 2014-2015, all the country's bars and clubs imported alcohol worth a piffling Tk 5 crore; it was more or less the same for the next year, and the next, according to the National Board of Revenue data.

That is even less than a Gulshan-based club's bar sales in a single year. In FY 2015-2016, its income from bar stood at Tk 6.5 crore, according to its annual report. 

The Daily Star reached out to all the four clubs (two of whom were investigated by the NBR over alleged VAT evasion) by phone, email and text messages. Each of them declined to comment.

With the demand for alcohol growing, especially in urban areas, bars have proliferated in recent years. Forty-nine bars got licences since 2009, putting the current number at 144, according to narcotics department data. And social clubs, many of whom serve alcohol, have grown too, catering to the elite of big cities.

Legally, bars and clubs can get alcohol from two sources: import themselves or buy it from Parjatan, one of the two state-run bonded warehouses, or from Carew and Co, the sole state-run distillery. In case of import, the tariff is up to 605 percent after the latest hike this year.  

But Parjatan's 2016-17 data show only about a fifth (28) of the 144 licensed bars and clubs bought liquor from it during the period.

This means, many buy liquor from the clandestine market. Even those who buy from Parjatan also purchase from the black market to meet their high demand and avoid high tariff.

"The [27] bars and hotels that showed interest to buy liquor and beer imported by Bangladesh Parjatan Corporation are not receiving the supplies as expected…. As a result, a large volume of beer is now lying unsold and is at the risk of being expired," Parjatan wrote to the Department of Narcotics Control on June 7 last year.

It also requested the narcotics department to order the 27 bars and hotels, which had applied to Parjatan for buying liquor, to take delivery of their supplies.

The Daily Star has the list of the 27 bars and hotels.

"Definitely, bars and clubs find procuring alcohol from the clandestine market less costly because of the high tax on legal imports," said a senior Parjatan official, who does not want to be named.

LEAKAGE FROM DIPLOMATIC BONDED WAREHOUSES

Diplomatic bonded warehouses import duty-free liquor, cigarettes  and other food items for diplomats who can buy those at a nominal price under the Vienna Convention of Diplomatic Relations. Each diplomat has a Tax Exemption Certificate (issued by the foreign ministry) that entitles them a certain quantity of duty-free goods. The quantity depends on their ranks.

Foreign nationals working with international organisations are also entitled to duty-free liquor from diplomatic bonded warehouses. Each of them is issued a passbook by the Customs Bond Commissionerate, showing their entitlement. Foreign tourists can also buy from there, but they have to pay duty.

There are six private and two state-run diplomatic bonded warehouses. The private ones are Dacca Warehouse Ltd, Sabir Traders Ltd (STL), National Warehouse, TOS Bond (pvt) Ltd, Eastern Diplomatic Services and H Kabir and Co Ltd. They were set up between 1978 and 1984. Parjatan Corporation and Biman Bangladesh Airlines are run by the government.

Over the years, multiple government investigations found numerous irregularities in diplomatic bonded warehouses, including leakage. 

The Daily Star team wanted to know how easy it is to get liquors out of a diplomatic bonded warehouse. To do so we accompanied somebody who does it regularly.

We chose one of the private ones to witness the verboten activities.

All sales at the diplomatic bonded warehouses must take place against original Tax Exemption Certificates (TECs), passbooks and passports. But with the right connection, you don't need any of that. 

As previously arranged through a contact, we went to this diplomatic bonded warehouse on February 1.

Unlike all other businesses, diplomatic bonded warehouses are not open for all. Their main gates usually remain tightly closed at all time and only authorised persons are allowed in.   

As we knocked on the main gate, a security guard partially opened the small pocket gate. We gave him the name of our contact and he let us in and led us to the counter. 

Two men behind the counter were watching the second day's play of the first Test match between Bangladesh and Sri Lanka.  

As we placed our order -- one Black Label, one Grants and one Smirnoff -- we looked around to see if there were any customs officer, who is supposed to be in uniform. We did not see any.

The order was ready within a couple of minutes. So we cleared the bill -- Tk 8,500 for the Black Label and Tk 4,000 each for the Grants whiskey and Smirnoff vodka -- and headed home. No questions asked, no papers demanded.

This was just on a small scale. Big sales are similarly done to supply the bars and clubs, all with the knowledge of the customs officials.

"What choice do we have when influential people ask for liquor? Sometimes they take several cartons at a time," said the chairman of a private diplomatic bonded warehouse requesting anonymity.

A deputy commissioner at the NBR said they were aware of such dealings. He too wanted to remain unnamed.   

So where do the diplomatic bonded warehouses get these extra liquors?

Government documents show the warehouses import way beyond their entitlement through under-invoicing and other trickery in record books. A large volume of that liquor is then sold in the open market, often using fake passbooks.

For example, in a letter to the Customs Bond on February 14 this year, the Customs Intelligence said, "There are allegations that various products, especially liquor and cigarette, imported through diplomatic and duty-free bonded benefits are being leaked through various illegal means and are being sold in open market."

The letter signed by its Additional Director General Kazi Muhammad Ziauddin also said the Customs Intelligence was ready to help the Customs Bond authorities in this matter, if asked.    

Each bonded warehouse has a customs officer to check illegal sales. He possesses the key to the lock of the warehouses and the warehouse authorities can neither open nor close the outlet in his absence. So when the liquors are being smuggled out of the stores, it is obviously being done with the clear knowledge of the customs officials.

This fact also came up in a Customs Bond office order on March 30 last year: "It is being observed that the bond officer(s) posted at the warehouses and the warehouse authorities are not following the rules and are operating as they please."

MYSTERIOUS ALLOTMENT BY NBR

The NBR did its last special audit of all the six private bonded warehouses in 2012.

The revelation was stunning. The audit found how the NBR itself creates scope for warehouses to import way beyond the diplomatic entitlement and how the warehouses sell the liquor outside, without paying duty.

The Daily Star had requested in writing latest data from the foreign ministry, Customs Bond and narcotics department under the Right to Information Act-2009. While the foreign ministry declined to provide the information citing "relations with foreign countries and international organisations," the Customs Bond and the narcotics department did not respond to the requests.

This is why we are using the data that are available.

In 2010-11, 825 diplomats and 124 privileged persons were given consumption entitlement worth $24.96 lakh by the foreign ministry and the Customs Bond.

But for unknown reasons, the NBR set the import entitlement of the bonded warehouses at $69.27 lakh, nearly three times the estimated demand.

The Daily Star could not reach the NBR officials who made the decision.

However, the warehouses went  one step beyond and imported products worth $72.41 lakh which is $5.53 lakh over the total entitlement and $47.45 lakh more than the estimated demand.

While three warehouses imported within their limit, STL, TOS Bond and Eastern imported goods worth $4.16 lakh, $92,000 and $45,000 beyond their entitlement, the 2012 audit found.

What happened to the additional imports? The answer is simple: it found its way into the black market.

The audit report said products (mainly liquor) worth $47.45 lakh went to "clandestine home consumption" in 2010-11.

About two months after the audit, the Customs Bond opened an investigation into these additional imports. What happened is puzzling. The Custom House in Chittagong did not record how much STL imported against its entitlement, leaving scopes for it to import any quantity again.

In its probe report, however, the customs authorities faulted STL, saying, "It is not an acceptable logic that a company will move to import goods based only on the balance on the entitlement sheet without analysing its own import records," said the report dated August 5, 2012.

However, the report also noted that these additional imports by STL were still in the store.       

As a penalty for the unauthorised import, STL was fined Tk 5 lakh, which it paid on February 13, 2013. The Customs Bond also adjusted its import entitlement for the following year by deducting the additional import volume, documents show.

STL, which is under a new ownership since February last year, said it was an "unmotivated mistake" on the part of the company and the customs officials.

TOS Bond also admitted importing beyond its limit, but termed it a clerical error.

Its Deputy General Manager Shafiqur Rahman told The Daily Star that they too were fined and that their yearly import entitlement was adjusted.

Eastern Diplomatic has questioned the findings of the audit and denied importing beyond the limit. But sources in other diplomatic bonded warehouses said Eastern too was similarly penalised for unauthorised imports.

LEAKAGE FROM STATE-RUN PARJATAN

The state-run Parjatan has its own records of attempted leak that went wrong.

At 2:30pm on January 25, 1998, customs intelligence raided its Mohakhali office in the capital on information of leakage.

Parjatan's then sales executive Nazmul Arefin was finalising the delivery of liquor, beer and cigarette worth $12,650 against "fake passbooks" (originally meant for privileged persons). He was caught red handed, case documents show.

In the subsequent raid, customs officials seized 216 fake passbooks ready to be used to leak liquors and other items worth 1.73 crore.

Five top Parjatan officials, including Nazmul, one Biman Bangladesh Airlines official and another individual were allegedly involved. Some of the Parjatan officials were initially suspended, but were later reinstated.

Now 19 years later, a number of them hold higher positions within the Parjatan, although they currently remain suspended.  

After a prolonged legal battle against the High Court stay orders against the case proceedings, the Anti-Corruption Commission finally pressed charges against the seven in April last year. The case is now pending before a Dhaka court, with five accused on bail and the two others on the run.

Customs documents dating back to 2004, 1999 and even 1993 are also evidence that irregularities like these have ruled the diplomatic bonded warehouses for decades. But the regulatory bodies have never made any coordinated efforts to check them, although they did issue orders and instructions from time to time.

"But the end results have been zero. The audit committee thinks that as regulatory authorities, it is an administrative failure of the Board [NBR], Bond Commissionerate, Custom Houses and the foreign ministry. Bonded institutions have taken advantage of this administrative failure," the 2012 audit team wrote in its concluding remarks.

IMPORT THROUGH MISDECLARATION

It's a perfect system to exploit.

Capital machinery have just 1 to 3 percent import duty on them. Also, while other imported goods go through inspections at up to 16 stages before their release from ports, there is no need for such rigorous examinations for capital machinery.

 As part of the government's trade facilitation policy to encourage investments, customs officials must release them quickly.

Exploiting the rules, a section of businesses is importing liquors in the name of capital machinery to sell them on the black market.

Between 2011 and 2017, customs and drug administration officials in Chittagong Port seized six large shipments of liquors imported through misdeclaration, customs and court documents show.

The consignments carried about 75,000 litres of whiskey, vodka and beer, but customs officials say this is only a tiny fraction of the actual volume of the alcohol smuggled into the country.

"We don't flag any shipment of capital machinery unless there are serious suspicions," said a customs official, meaning many consignments of liquors may have easily slipped through the net.

As a controlled substance, alcohol has high tariff on it -- 450 percent on beer and 605 percent on hard liquor such as whiskey and vodka.

Discouraged, many hotels, clubs and bars get their supplies from illegal channels, including imports through misdeclaration, according to business insiders, top government officials and customs documents obtained by The Daily Star.

The latest such large imports through false declaration was seized at the Chittagong Port on March 6 last year.

Import documents submitted to the customs by the two companies show the containers had capital machinery worth Tk 50 lakh for poultry farming.

But during inspection, customs officials found highly-taxed products worth Tk 134 crore, including 20,000 litres of alcohol worth about Tk 17 crore. Other items included cigarettes and LED televisions, two other highly-taxed products.

Field visits by customs officials revealed that the firms -- Henan Anhui Agro Lc and Ges Agro BD and JP -- do not even exist.

In the past, these two fictitious companies imported highly-taxed products worth Tk 1,000 crore in 72 containers, all in the name of capital machinery, but had them released from the port, case documents show.

Investigators suspect there were liquors in those shipments too.

"Such irregularities are not possible without the involvement of the importers' bank and customs and port officials," said Mainul Khan, commissioner of Customs Valuation and Internal Audit, who is also a former director general of Customs Intelligence. 

The case is now pending before a Dhaka court. The only accused, Abdul Mutaleb who owns both the companies he opened using fake documents, is on the run, according to the charge sheet.

Earlier in 2014, H Kabir and Co, a big name in liquor business, was caught in a big scandal.

On October 25 that year, the Rab, Chittagong Customs and Drug Administration in a joint raid seized 40,000 cans of foreign beer and 5,000 bottles of liquor from its warehouse in Karnaphuli Export Processing Zone area. Some of its officials were openly selling liquor at the warehouse gate, according to the case documents.

 As a diplomatic bonded warehouse based in Dhaka, H Kabir, a concern of Union Group, is authorised to import alcohol worth $9.15 lakh a year, according to the latest data available. 

But after the seizure, the company could not show import documents of the liquor, meaning the alcohol must have been imported through misdeclaration, according to the charges pressed by the Bandar Police Station in the port city.

 Seven people, mostly H Kabir officials, including its Managing Director Dilder Hossain, were   charged with unauthorised import, storing and sale of the liquor. The case is now pending before the High Court, said Shamim Ahmmed, deputy director of the narcotics department, Chittagong.  

Under Customs Act 1969, the customs authorities could suspend or even cancel the licence of these illegal importers. But none of them faced such actions. However, as per the rules, customs authorities sold all these seized liquors to Parjatan, officials said.

Rana Shafiullah, chairman of Union Group, said the seizure was illegal and unjust.

As a bonded warehouse, they require no permission from the narcotics department or the drug administration for their operations, including imports and sales, he told The Daily Star by phone on September 20. 

AKM Nurul Huda Azad, additional commissioner of risk management unit at the NBR, said they had to ensure quick release of capital machinery. 

Often, officials cannot check the import documents properly because of the heavy rush at the country's premier sea port, which handles some 90 percent of the total export-import volume.

"Exploiting the situation, some dishonest traders are importing highly-taxed products, including liquor, in the name of capital machinery," said Azad, who was additional director general of the Customs Intelligence and Investigation Directorate (Chittagong Zone) until recently.

To avoid being caught, importers sometimes unload the liquor bottles from mother vessels in small boats at night. These boats then carry the items to their destination through the sea, avoiding the customs inspections at the port.

For example, on the night of March 13, 2014, customs and coastguard officials spotted some busy activities around a ship at the outer anchorage. As they went closer with their patrol boat, they found workers were carrying something from the mother vessel and loading them into small engine trawlers.

In the subsequent raid, they seized 700 bottles of whisky and 1,500 bottles of beer from the boats and the vessel. The ship carrying the flag of Panama came from Malaysia with cement clinker, said the investigation report filed by Assistant Commissioner (customs) Shahidul Islam.

Last year, customs officials seized illegally imported liquors, cigarettes and fuel from more than 100 ships moored at the outer anchorage, customs documents show. 

HIGH TARIFF, BUREAUCRATIC NIGHTMARE

But how long can it take if one wants to go by the rules to buy liquor?

There are exceptions, but the experience of Hotel Sea Palace in Cox's Bazar can be an instance.

The hotel sent a letter to Parjatan on May 8 last year, wanting to buy 85 bottles of whiskey. Parjatan received the letter three days later and replied back on May 14, saying they needed clearance from the commerce ministry, narcotics department and Customs Bond.

The narcotics clearance came two months later, on July 12.

The commerce ministry took full one month to issue the permission. Another one month later, the Customs Bond gave the go-ahead on August 31 and Parjatan finally released the supplies on September 27, nearly five months after the hotel applied. 

Such painfully long process and the high tariff on alcohol are reasons why the black market is thriving. Also, when the demand is so high and supply is artificially restricted, the black market is bound to thrive to the benefit of a chain that involves a group of customs officials, police, narcotics people and of course the sellers.

Currently, Bangladeshi users pay about $12 for the liquor available for just 30 cents in many countries, narcotics officials said.

"The tariff is really very high," Al Amin Pramanik, commissioner of the Customs Bond Commissionerate, told The Daily Star on April 23.  

"As both the import and procurement process are complex and expensive, licensed bars and clubs are losing interest in the formal supply channel. As a result, supplies of illegal liquor are rising and the government is losing huge revenue in the process," narcotics department Director General Jamal Uddin Ahmed wrote in a letter to the home ministry on April 3 this year.

If the tax and duty on alcohol is set at a tolerable level, authorised bars and clubs will procure alcoholic beverages from legal sources. This will also help curb the illegal liquor trade, the DG wrote, requesting the home ministry to take steps to bring down the tariff.

 On April 18, the home ministry requested the NBR to rationalise the tariff.

Earlier in 2009, a committee set up by the NBR made similar suggestions.

 "To save the youth from the addiction of phensedyl and other psychotropic drugs [such as cocaine and other drugs to treat depression], tariff on alcoholic beverages may be slashed. Experience shows that black markets cannot operate when tariff is low," the committee report concluded.

It died down there, and the illegal trade thrives as before.