A shisha bar owner avoided paying over £500,000 in tax by smuggling flavoured tobacco masquerading as Arabian incense, the Old Bailey heard.

Asadur Rahman, who also works as a Heathrow Airport retail assistant, had claimed that he ran a company importing flavoured tobacco from the Middle East while holding down his job.

The 30-year-old director of Saha Lounge Ltd of Willesden Lane, Kilburn, and his business partners avoided paying a total of £515,726 on 5,892kg of shisha between October 2011 and May 2012, the court heard.

Prosecutor Andrew Evans told the Old Bailey: 'The directors of Saha Lounge Ltd found a way of avoiding having to pay the heavy excise duty which shisha tobacco attracts which meant they were able to sell it more cheaply and competitively than if they had paid the duty.

'They avoided the excise duty by disguising the packets of tobacco to make it look like they contained Arabian incense rather than tobacco, simply by pasting over the original labels with false labels.

'It was the perfect disguise because the tobacco carries a strong fragrant smell.

'Although incense attracts import VAT and customs duty that is payable at a much lower rate than tobacco, unlike tobacco it does not attract any excise duty at all.

'In other words they were smuggling it. They were able to avoid just over half a million pounds worth of excise duty.'

The jury heard the rate of excise duty for shisha tobacco is 'very high' at £91.81 per kilo.

The prosecution said Rahman ran Saha Lounge Ltd with his two brothers, who did not appear before the court, the Brent & Kilburn Times reports.

Rahman from Plender Street, Camden, denies conspiracy to fraudulently evade excise duty.

He is due to be sentenced on 11 October.