The Bangladesh government's revenue authority, National Board of Revenue (NBR), has sued 14 garment factories for evading import duty of a total amount of $10m.

NBR said the factories imported some 15 million yards of fabric, worth about $15m, under bonded warehouse facilities without payment of import duty, claiming that it was to be used to manufacture garments for export. But instead they sold the fabric in the open market without payment of import duty.

Bonded warehouse facilities are given for import of fabrics for apparel manufacture under back-to-back letters of credit (LCs). Such warehouses, numbering several thousand, are operated in the garment manufacturing cities, mostly, in Dhaka and Chittagong - two hubs where more than $3bn worth of imported fabric is used for export manufacturing.

A special customs squad, formed by NBR, detected the duty evasion in a number of raids and investigations carried out in recent months. Twelve of the factories were located in Dhaka city and its suburbs, while the remaining two were in Chittagong.

The customs officials temporarily suspended bonded warehouse facilities for the sued factories and the owners of the factories were issued with arrest warrants as the customs department filed criminal cases against them.

The factories blacklisted by the customs and the NBR are: Allure Apparel Ltd, Dhaka; Arbatex Garments, Dhaka; Biplab & Brothers, Dhaka; GNF Apparels, Dhaka; Latest Garment Ltd, Dhaka; Litmond Garment Ltd, Dhaka; Quality Fashion, Dhaka; SR Garment, Dhaka; Shim Garment Pvt Ltd, Dhaka; United Excellent, Dhaka; Zeal Fashion, Dhaka; Ras Garments, Chittagong; and US Garments, Chittagong.

NBR and customs officials blamed the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) for not properly monitoring the imported fabrics utilisation declaration certificates. Currently the customs officials rely heavily on BGMEA, an apex body of the country's 3,000 export-oriented clothing manufacturers, in maintaining tax and import tariffs related disciplines.

However, many members in BGMEA denied the allegation that they had lapsed in monitoring the utilisation of duty-free fabrics and said the sued factories could evade duty due to lack of proper maintenance of bonded warehouses by the customs department.

The officials in NBR alleged that BGMEA commonly issued utilisation declaration certificates without checking the condition of previous certificates. Supporting this allegation, some textile mills owners in Dhaka said the LCs were also not verified properly and the export performance certificates were issued from banks that failed to check the shipment documents. As a result, it was quite common for garment factories to evade all sorts of taxes and duties.

NBR has now taken some measure to investigate the existing loopholes in the garment factories, has so far found that at least 600 factories are involved in various types of criminal offences, such as tax evasion, forgery, and corruption. NBR is planning legal actions against these factories.

By Jahir Ahmed in Dhaka