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consigned to a local spirit shop, which was under their control, and the duty paid labels and passes of a genuine consignment were removed at the spirit shop and sent back to the Distillery, where they were re-used to cover up the fraudulent consignment.
8. As usual Tai Pak and Yee Pak, tiny villages in the northern part of Lantao facing Hong Kong, were the sources of most of the illicit spirit in rural areas. Constant raids were carried out on these hills, and nearly always illicit stills and hundreds of gallons of fermenting mash were destroyed. Arrests were unusual, because the appearance of a Revenue Launch was the signal for an outburst of cracker firing, which served as a warning to all operators who merely abandoned their stills, and mash, and fled. Occasionally raids were conducted under cover of darkness but the barking of watch dogs usually betrayed the presence of a raiding party, and although sufficient evidence of distilling was always found outside the village, any request for information in the village itself was met with a sullen and stony silence.
9. On one occasion an arrest was made through the ingenuity of a Revenue Officer, who approached the scene of operation by wading up to his waist in water along the bed of a stream. Five fire places and 160 gallons of rice mash were discovered.
10. The river steamers and launches still continued to give trouble, and small lots of spirits were constantly found on ships engaged in the Northern Coastal Trade.
11. TOBACCO.
11. The total consumption of tobacco of all kinds for all purposes showed a decrease of 331,217 lbs. in comparison with 1935, but owing to the abolishing of the factor and the substitution of a higher rate of duty the net amount of revenue collected was $4,066,930 which is a very pleasing increase in comparison with former years. The fact, however, that drawback payments to the extent of $200,000 will have to be made to the British Cigarette Company in January 1937 for duty paid tobacco taken out in December 1936 somewhat diminishes this achievement.
12. Thrice as much tobacco was exported on drawback this year as in the previous year, and the increase in the export trade with Dairen is a particularly pleasing feature.
13. There was a notable increase in the amount of clean leaf imported due solely to the increased tariff rate, whereby Chinese importers found it cheaper to take their tobacco in the first instance to Macao to be stripped and cleaned, than to rely on the Government allowance.