Lucknow: The Directorate General of GST Intelligence (DGGI) has busted an illegal pan masala and tobacco manufacturing network in Uttar Pradesh after seizing 27 unregistered pouch-packing machines and detecting an alleged tax evasion of around ₹185 crore. Lucknow Zonal Unit of DGGI also arrested the proprietor of the manufacturing firm after recovering 15.5 lakh pouches of finished products during coordinated searches at six premises in Chitrakoot and Banda.Acting on a specific tip-off, DGGI teams carried out searches that led to the discovery of 27 undeclared pouch-packing machines, including six used for packing scented zarda, nine for pan masala and 12 for dohara/desi gutka. Officials also found mixing equipment as well as areca nut crushing and drying machines, indicating full-scale manufacturing activity.The agency seized 15,50,922 pouches of finished goods comprising pan masala, chewing tobacco, scented jarda and sugandhit supari. Large quantities of inputs and packaging material were also recovered, including 32.9 metric tonnes of areca nut and cut areca nut, 2.8 metric tonnes of tobacco, 8.4 metric tonnes of packing material, pouches and laminates, 470 kg of katha powder, 850 kg of glycerine, 545 kg of essence and 256 kg of unpacked pan masala.DGGI said evidence suggests the operation functioned through a network of unregistered premises using undeclared machinery, with finished goods allegedly cleared clandestinely without payment of GST, HSNS Cess and Central Excise duty. The proprietor was prima facie found to have organised and managed the alleged clandestine manufacture and clearance, and was arrested and sent to judicial remand by Special Chief Judicial Magistrate (Customs), Lucknow.A capacity-based cess and taxation regime for the sector came into effect on Feb 1, 2026, under which undeclared packing machines can be treated as illegal units operating at full capacity. Since then, DGGI formations nationwide have booked 27 cases, detected evasion of ₹668 crore, seized 131 machines and arrested 17 persons, with ₹11.7 crore paid voluntarily during investigations.
