Azad Hassan (L), whose hand was chopped off by Islamic State militants, cries as he stands beside his wounded father in a house at Nimrud village, south of Mosul, Iraq, December 13, 2016. REUTERS/Mohammed Salem AL-DHIBANIYAH, Iraq (Reuters) - His right arm strapped with a tourniquet and numbed by anaesthetic, Azad Hassan sat before the crowd waiting for Islamic State militants to chop off his hand as a punishment.

First, he had watch them do the same to his brother.

Freed from Islamic State rule in Mosul by Iraqi forces who are fighting to recapture the city, the Hassan family bear more scars than most from two years under the jihadists' self-declared caliphate.

The family tragedy parallels Mosul's own recent history, from its storming by Islamic State in 2014, and the imposition of the group's ultra-hardline rule in its de facto capital, to the Iraqi military campaign to retake it which has led to ferocious fighting in eastern districts.

A dispute over flour deliveries brought the two brothers before an Islamic State court more than a year ago. Militants had already taken another brother a few months before - a document given to the family says he was shot suspected of working with the Iraqi army, but they never saw his body.

A younger brother has joined the Sunni militia brigades, one of the forces fighting in support of the army around Mosul.

On a small USB stick, Azad, 21, carries a copy of the Islamic State video made of his and his brother Mohamed's public amputations, hoping someday for some form of justice.

"As long as I live I won't forget that moment they cut off my brother's hand," Azad said. "Then they tied down my hand. They had to hit it twice to cut it off. I wanted the ground to open up."

Their father Hussein lies in a small bed in the family's farm in the village of Al-Dhibaniyah outside Mosul, his legs seeping blood through bandages over wounds from an explosion after he returned to their former home in a recaptured but still fragile area in Mosul.

"They cut the hands of two of my sons, and my third son they took him - Daesh hurt my family badly," said Hussein, whose wife is Kurdish, using an Arabic acronym for Islamic State. "We are all Iraqi, all the same people. I don't know why they did this to us."

Corpses crucified

Azad Hassan (L), whose hand was chopped off by Islamic State militants, cries as he stands beside his wounded father in a house at Nimrud village, south of Mosul, Iraq, December 13, 2016. REUTERS/Mohammed Salem

Iraqi forces, engaged in a nine-week-old U.S.-backed campaign to crush Islamic State in its last urban bastion in the country, have retaken about a quarter of Mosul, but their advance has been slow and punishing.

As they slowly gain ground, refugees fleeing the city and those living inside recall a brutal life under Islamic State, whose religious police would patrol and enforce their laws.

Men were forced to wear beards to lengths deemed Islamic. Women had to cover up from head to foot. Some people were beaten for infractions, others were shot - their corpses sometimes crucified - with punishments decided by Islamic State courts.

One refugee in Khazer camp outside the city showed Reuters scars from where he says his teeth were pulled out and his tongue slashed for smoking in public.

Islamic State also systematically killed, captured and enslaved thousands from the Yazidi minority in northern Iraq region around Mosul, regarded by Sunni militants as devil-worshippers, and targeted Christian towns for desecration and Shi'ites who they deem apostate.

Masked Jihadist

Azad Hassan (2nd R) and his brother Mohammad, whose hands were chopped off by Islamic State militants, stand beside their wounded father in a house at Nimrud village, south of Mosul, Iraq, December 13, 2016. REUTERS/Mohammed Salem When militants overran the city in mid-2014, Azad was helping in the family's small flour delivery business.

"Daesh came to Mosul and turned our lives upside down," he said. "At first they tried to come as if they were revolutionaries. But then they showed their real face, torturing, cutting off heads, treating people extremely badly."

The Hassan brothers said they ran foul of Islamic State in May last year because they were selling flour to a baker who was loyal to the militants and who didn't pay his debts. One day the brothers broke into his business to take back flour in lieu of cash.

Azad said they were summoned by Islamic State judges, detained and accused of theft. An Iraqi judge known as the "Blood Judge" sentenced them to be beheaded and crucified, but a Saudi judge changed the sentence to amputation.

Later, they were taken to a public square where Islamic State had gathered hundreds to watch since early morning. A doctor administered anesthetic to their wrists.

In the Islamic State video, a militant fighter was the first to be punished, screaming "God is Great" after his hand was hacked off by a masked jihadist who smashed a cleaver's blunt edge down onto another blade set against the man's wrist.

Then it was the turn of 25-year-old Mohamed, and finally Azad's hand was amputated after his right arm was strapped to a table. Another militant wrapped the bloody stump in bandages.

"They are not human, they are against all humanity," Mohamed said. "I wanted to die when I saw them cutting my brother."

Now both the married men, who are unemployed and supported by their family, are looking to aid agencies for help with artificial limbs. Neither has much hope.

Their younger brother Niad, 20, has taken another route, joining a local government-sponsored Sunni militia taking part in the Mosul campaign.

On his right forearm, Niad tattooed the face of a woman with hair flowing free, an image he says was to defy Islamic State.

"Daesh would never let us do that so that's why I did it," he said. "It was to say no to Daesh."

(Editing by Pravin Char)