Clandestine pan masala, tobacco mfg network busted

On Friday, the finance ministry announced the dismantling of a concealed pan masala and tobacco manufacturing network in Uttar Pradesh, revealing an evasion of approximately Rs 185 crore. The Lucknow Zonal Unit of Directorate General of GST Intelligence (DGGI) conducted midnight searches at six premises in Chitrakoot and Banda districts, uncovering 27 undeclared pouch-packing machines.

These machines were distributed across production of scented jarda, pan masala, and dohara/desi gutkha. Additionally, mixing, areca nut crushing, and drying equipment were discovered. The operation also resulted in the seizure of 15,50,922 finished pouches, including pan masala, chewing tobacco, scented jarda, and sugandhit supari.

Raw materials seized totaled 32.9 metric tons of areca nut and cut areca nut, 2.8 metric tons of tobacco, 8.4 metric tons of packing materials, and various other equipment. The evasion of GST, cess, and central excise duty amounts to Rs 185 crore. Authorities discovered that the manufacturing operation was carried out through an unregistered network using undeclared machinery, with the finished goods cleared without paying applicable taxes.

The proprietor of the manufacturing firm was arrested under Section 26 of the Health and National Security Cess Act, 2025, and the Central Excise Act. Since February 1, 2026, a capacity-based monthly cess has been enforced on pan masala based on the number, type, and capacity of packing machines. The DGGI has intensified its intelligence-led enforcement to combat unscrupulous manufacturers evading these taxes.

So far, DGGI formations across India have booked 27 cases involving production suppression, clandestine clearance, and evasion of Rs 668 crore, seizing 131 pouch-packing machines and arresting 17 individuals.