Why 40 packing machines are at the centre of ₹160 crore tax evasion case
HYDERABAD: Officers of the Hyderabad Central Goods and Services Tax (CGST) Zone have busted a clandestine pan masala and tobacco manufacturing unit at D Pochampally on the outskirts of Hyderabad and detected an estimated duty evasion of about ₹160 crore.
Acting on specific intelligence, CGST officers searched the tin-shed premises on August 20, 2026. They found 40 undeclared Form-Fill-Seal (FFS) pouch-packing machines and about 56 workers on the shop floor.
The unit was manufacturing and packing branded and unbranded pan masala and scented jarda, besides tobacco products, according to the department.
Officials seized finished stock weighing about 5,500 kg and ready-to-dispatch consignments valued at ₹76 lakh. They also seized about 2,015 kg of pan masala mixture and 810 kg of tobacco.
The seized material included the finished stock, raw material, packing material, 40 FFS machines, two vehicles used for transportation and other incriminating documents.
The department said the unit was operating without registration and clearing finished goods without paying applicable GST, Health Security se National Security (HSNS) Cess and central excise duty.
The key person allegedly organising and managing the clandestine manufacture and clearance was arrested on August 21, 2026. He was produced before the Special Judge for Economic Offences at Hyderabad and remanded to judicial custody for 14 days.
Officials estimated the total duty evasion at about ₹160 crore based on the stock physically verified, the scale of machinery and manpower deployed and statements recorded during the investigation.
New cess regime links levy to packing machine capacity
A capacity-based cess and taxation regime for the pan masala and tobacco sector came into effect on February 1, 2026, the department said.
Under the Health Security se National Security Cess Act, 2025, a monthly capacity-based cess applies to pan masala based on the number, type and capacity of packing machines installed.
A similar capacity-based central excise levy applies to chewing tobacco, jarda and gutkha under the Central Excise Act, 1944.
The department said manufacturers may attempt to evade the levies by using undeclared machinery. The Hyderabad CGST Zone has therefore stepped up intelligence-led enforcement in the sector, combining data analytics with field operations.
