Hyderabad: Hyderabad CGST Zone officials have busted a clandestine pan masala and tobacco manufacturing unit operating from a tin shed on the outskirts of the city. The operation led to the detection of an estimated ₹160 crore in duty and cess evasion.
Acting on specific intelligence, CGST officers conducted a search at the premises on Thursday. During the operation, they found 40 undeclared Form-Fill-Seal (FFS) packing machines and around 56 workers engaged in manufacturing activities.
The unit was allegedly manufacturing and packing several branded and unbranded pan masala and scented jarda products without the required registration and payment of applicable taxes.
₹160 Crore Tax Evasion Detected in Pan Masala Unit
Officials seized around 5,500 kg of finished pan masala and tobacco products, including ready-to-dispatch consignments valued at approximately ₹76 lakh.
The seizure also included around 2,015 kg of pan masala mixture and 810 kg of tobacco, along with two vehicles allegedly used to transport the products.
Besides the finished goods and raw materials, officers seized packing materials, 40 FFS machines and other incriminating documents during the search.
According to officials, the evidence indicated that the unit was being operated clandestinely without registration. The finished products were allegedly being cleared without payment of GST, HSNS (Health Security and National Security) Cess and Central Excise duty.
The person allegedly managing and organising the clandestine manufacturing and clearance operations was arrested on Friday. He was produced before the Special Judge for Economic Offences in Hyderabad and subsequently sent to 14 days of judicial custody.
An official said the estimated tax and cess evasion was calculated based on the quantity of stock, scale of machinery, manpower and statements recorded during the investigation.
A capacity-based cess and taxation regime has been applicable to the pan masala and tobacco sector since February 1, 2026.
Under the HSNS Cess Act, 2025, a capacity-based monthly cess is imposed on pan masala based on the number, type and capacity of packing machines installed at a manufacturing facility.
Similarly, a capacity-based central excise levy applies to chewing tobacco, jarda and gutkha under the Central Excise Act, 1944.
The investigation is continuing to determine the full extent of the alleged tax evasion and identify others who may have been involved in the clandestine manufacturing and distribution network.
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