Key person of the manufacturing unit arrested and remanded to judicial custody
40 pouch-packing machines, finished stock, raw material and two vehicles seized from a tin-shed facility in Medchal-Malkajgiri District
Capacity-based cess and taxation regime under the Health Security se National Security (HSNS) Cess Act, 2025 applicable on pan masala, and central excise levy on chewing tobacco, jarda and gutkha under the Central Excise Act, 1944, in effect since 1 February 2026
HYDERABAD, AUGUST 22, 2026: Officers of the Hyderabad CGST Zone have busted a clandestine pan masala and tobacco manufacturing unit operating out of a tin-shed facility on the outskirts of Hyderabad. Acting on specific intelligence, a search operation was conducted at the premises on August 20, 2026.
The search led to the detection of 40 undeclared FFS (Form-Fill-Seal) packing machines used to pack pan masala and tobacco/scented jarda. Around 56 workers were found engaged on the shop floor at the time of the search. The unit was found manufacturing and packing several branded and unbranded products of pan masala and scented jarda.
The operation resulted in the seizure of a large quantity of finished stock of pouches weighing around 5,500 kg and ready-to-dispatch consignments valued at Rs. 76 lakh, along with raw material comprising approximately 2,015 kg of pan masala mixture and 810 kg of tobacco, besides two vehicles used for transportation of the illicit goods. Officers also seized packing material, the 40 FFS machines, and other incriminating documents.
Evidence indicates that the unit was being run clandestinely without registration, with finished goods being cleared without payment of applicable GST, HSNS Cess and Central Excise duty. The key person found to be organising and managing the clandestine manufacture and clearance was arrested on 21.08.2026 and produced before the Hon’ble Special Judge for Economic Offences, Hyderabad, who remanded him to judicial custody for 14 days. Based on the stock physically verified, the scale of machinery and manpower deployed, and the statements recorded, the total duty and cess evasion detected is approximately Rs. 160 crore.
A capacity-based cess and taxation regime has been in effect since 1 February 2026 in the pan masala and tobacco sector. Under the Health Security se National Security (HSNS) Cess Act, 2025, capacity-based monthly cess is applicable on pan masala, computed on the basis of the number, type and capacity of packing machines installed. A similar capacity-based central excise levy is imposed on chewing tobacco, jarda and gutkha under the Central Excise Act, 1944. Unscrupulous manufacturers attempt to avoid these duties and cesses by using undeclared machinery clandestinely. To counter this, the Hyderabad CGST Zone has stepped up intelligence-led enforcement in this sector, combining data analytics with coordinated field operations.
About the Author
