Gurgaon: The Central Goods and Services Tax (CGST) department on Friday busted a racket in tax evasion — to the tune of Rs 10 crore — after a raid at pan masala manufacturing units in Gurgaon and Mewat.CGST arrested a key accused, who allegedly orchestrated the illegal manufacturing activities by appointing his employees as dummy directors in the companies. Vijay Kumar Agarwal was produced before an additional chief judicial magistrate court and remanded to 14 days of judicial custody. CGST also seized several unregistered machines operating covertly.The total evasion of central excise duty is estimated at over Rs 8 crore, along with cess, for a short period of two months from Feb 1, 2026 to March 31, 2026. According to officials, the units were engaged in large-scale unaccounted production and supply of pan masala to evade statutory taxes.CGST said preliminary investigation “indicates deliberate suppression” of production and clandestine removal of excisable goods. Under CGST rules, manufacturers are required to pay Rs 1 crore per machine annually, in addition to GST on the finished products. By hiding multiple operating machines, the firm allegedly avoided substantial tax liabilities. The raid revealed a systematic setup designed to bypass registration and underreport production.Agarwal, engaged in the real estate business, was behind the clandestine production and clearance of pan masala and jarda — processed chewing tobacco used with paan — products without payment of applicable duty and cess. “Investigation is underway to uncover the complete modus operandi and to identify other beneficiaries involved in the racket,” a CGST officer said.CGST officials have initiated proceedings to recover tax dues, impose penalties and assess the total evasion amount. The crackdown is part of an intensified drive to curb tax leakage in the pan masala and tobacco sector, known for high revenue risks.ACP (CGST HQ) Karan Singh said the Gurgaon unit, based on specific intelligence, initiated investigations into the clandestine manufacturing and clearance of pan masala and scented jarda products by the two companies registered in Gurgaon and Mewat. “During the search operations, officers seized large quantities of raw materials, finished goods, incriminating documents and 10 undeclared manufacturing and packing machines (five pan masala packing machines and five zarda packing machines),” said Singh.It was also found that the companies had set up operations at undeclared premises and were using unregistered machinery for production. No statutory records or declarations regarding production or machinery were maintained, in violation of relevant legal provisions.
