DGGI Busts Illegal Pan Masala, Tobacco Manufacturing Network in UP; Detects Suspected Tax Evasion of Rs 185 Crore:

The Directorate General of GST Intelligence (DGGI) has busted an illegal pan masala and tobacco manufacturing network in Uttar Pradesh and detected suspected tax evasion of around Rs 185 crore.

The Lucknow Zonal Unit of DGGI carried out searches at six locations in Chitrakoot and Banda. During the searches, officials found 27 unregistered pouch-packing machines and seized around 15.5 lakh pouches of finished pan masala and tobacco products.

The machines included six used for scented zarda, nine for pan masala and 12 for dohara or desi gutka. Officials also found mixing machines, areca nut crushing and drying equipment, suggesting that the premises were being used for large-scale manufacturing.

The seized products included pan masala, chewing tobacco, scented zarda and sugandhit supari. Officials also recovered 32.9 tonnes of areca nut, 2.8 tonnes of tobacco, 8.4 tonnes of packaging material, 470 kg of katha powder, 850 kg of glycerine, 545 kg of essence and 256 kg of unpacked pan masala.

According to DGGI, the network allegedly used unregistered premises and undeclared machines to manufacture and sell products without paying the required GST, HSNS cess and Central Excise duty.

The proprietor of the manufacturing firm was arrested for allegedly organising and managing the illegal manufacturing and sale of the products. He was later sent to judicial remand by the Special Chief Judicial Magistrate (Customs), Lucknow.

The action comes after a new capacity-based cess and taxation system for the sector came into effect on February 1, 2026. Under the system, undeclared packing machines can be treated as illegal units operating at full capacity.

Since the new system was introduced, DGGI units across the country have registered 27 cases, detected tax evasion of around Rs 668 crore, seized 131 machines and arrested 17 people. Around Rs 11.7 crore has also been paid voluntarily during investigations.