Hyderabad CGST Busts Illicit Pan Masala Unit, Uncovers Rs 160 Cr Tax Evasion

Officers of the Hyderabad Central Goods and Services Tax (CGST) zone have busted a clandestine pan masala and tobacco manufacturing unit operating on the outskirts of Hyderabad, uncovering duty and cess evasion estimated at approximately Rs. 160 crore.

Acting on specific intelligence, CGST officials conducted a search operation at a tin-shed facility, discovering 40 undeclared Form-Fill-Seal (FFS) packing machines. The equipment was being actively utilized to package pan masala, tobacco, and scented jarda.

During the raid, enforcement officers found around 56 workers engaged on the shop floor. The clandestine unit was actively manufacturing and packaging several branded and unbranded varieties of pan masala and scented jarda.

The search operation led to the seizure of finished stock of pouches weighing roughly 5,500 kilograms, including ready-to-dispatch consignments valued at Rs. 76 lakh. Officials also confiscated substantial quantities of raw materials, comprising approximately 2,015 kilograms of pan masala mixture and 810 kilograms of tobacco, along with packing supplies and two vehicles used to transport the illicit goods.

Investigators established that the facility was functioning clandestinely without registration and clearing finished products without the payment of applicable Goods and Services Tax (GST), Central Excise duty, and Health Security se National Security (HSNS) Cess. Officers also seized the 40 FFS machines and other incriminating documents.

The key person responsible for organising and managing the illicit manufacturing and distribution network was arrested by the authorities. Following the arrest, the individual was produced before the Special Judge for Economic Offences and remanded to judicial custody for 14 days.

According to tax authorities, the evasion estimate of Rs. 160 crore was determined based on physical verification of stock, the scale of machinery and manpower deployed, and statements recorded during the investigation. A capacity-based taxation and cess regime under the HSNS Cess Act-2025 has been in effect since February 1, 2026, under which monthly cess on pan masala is computed based on the number, type, and capacity of installed packing machines.

Chewing tobacco, jarda, and gutkha are also subject to a capacity-based central excise levy under the Central Excise Act, 1944. Officials noted that the Hyderabad CGST Zone has stepped up intelligence-led enforcement combining data analytics with coordinated field operations to counter undeclared machinery use.