Hyderabad CGST busts ₹160 crore pan masala tax evasion in Telangana
Synopsis
A tin-shed in Telangana's Medchal-Malkajgiri district concealed a fully operational, unregistered tobacco factory — 56 workers, 40 undeclared packing machines, and goods ready for dispatch. The ₹160 crore evasion figure and a near-simultaneous DGGI bust in Uttar Pradesh signal that India's tax authorities are zeroing in on a well-organised, multi-state underground tobacco economy.
Key Takeaways
Hyderabad CGST Zone raided a clandestine pan masala and tobacco unit in Medchal-Malkajgiri, Telangana , on 22 August .
Total duty and cess evasion estimated at approximately ₹160 crore , covering GST, HSNS Cess, and Central Excise duty.
Officers seized 5,500 kg of finished stock, 2,015 kg of pan masala mixture, 810 kg of tobacco, 40 FFS machines , and two vehicles .
56 workers were found engaged in manufacturing at the unregistered premises during the raid.
The key accused was arrested on 21 August and remanded to 14-day judicial custody by the Special Judge for Economic Offences, Hyderabad.
Earlier in August, DGGI's Lucknow Zonal Unit busted a similar operation across 6 premises in Chitrakoot and Banda, Uttar Pradesh , seizing 27 undeclared packing machines .
The Hyderabad CGST Zone has dismantled a clandestine pan masala and tobacco manufacturing unit in Telangana's Medchal-Malkajgiri district, detecting duty and cess evasion of approximately ₹160 crore and arresting a key accused, according to an official statement released on Saturday, 22 August. The bust marks one of the largest GST evasion detections in the tobacco segment in the region this year.
How the Unit Was Uncovered
Acting on specific intelligence, CGST officers conducted a search at a tin-shed premises, where they discovered an unregistered manufacturing facility engaged in the production and packing of pan masala and scented jarda. At the time of the raid, 56 workers were found actively engaged in manufacturing operations on site.
Officials detected 40 undeclared Form-Fill-Seal (FFS) packing machines being used for packaging tobacco products — machinery that had not been declared to tax authorities. The unit was producing and packing both branded and unbranded varieties of pan masala and scented jarda.
Seizures Made During the Operation
The search yielded significant seizures. Officers recovered finished stock weighing approximately 5,500 kg along with ready-to-dispatch consignments valued at around ₹76 lakh. Additionally, officials seized roughly 2,015 kg of pan masala mixture, 810 kg of tobacco, packing materials, the 40 FFS machines, two vehicles allegedly used to transport illicit goods, and incriminating documents.
Scale of Tax Evasion
Preliminary investigations established that the unit was operating entirely without GST registration and was clearing finished goods without paying applicable GST, Health Security and National Security (HSNS) Cess, and Central Excise duty. Based on physical stock verification, installed machinery, workforce strength, and recorded statements, officials estimated total duty and cess evasion at around ₹160 crore.
Arrest and Judicial Custody
The person allegedly responsible for organising and managing the clandestine manufacturing and clearance operations was arrested on 21 August. He was subsequently produced before the Special Judge for Economic Offences in Hyderabad, who remanded him to judicial custody for 14 days.
Part of a Wider Crackdown
This bust is not an isolated incident. Earlier in August, the Directorate General of GST Intelligence (DGGI) uncovered a similar clandestine manufacturing operation spanning six premises in Uttar Pradesh's Chitrakoot and Banda districts, involving pan masala, scented jarda, and gutkha. DGGI's Lucknow Zonal Unit detected 27 undeclared pouch-packing machines — including six for scented jarda, nine for pan masala, and twelve for dohara/desi gutkha — along with mixing, areca nut crushing, and drying machines. The pattern points to a systematic and organised effort to evade the high tax burden on tobacco and pan masala products across multiple states.
Point of View
40 undeclared machines, and ₹160 crore in estimated evasion from a single tin-shed unit suggest this was no small-time operation. What mainstream coverage often misses is the structural incentive: GST, HSNS Cess, and Central Excise together make tobacco among the highest-taxed categories in India, creating a persistent arbitrage for those willing to operate in the shadows. Until enforcement is matched by deterrent sentencing and supply-chain traceability mandates, busts like this will remain a game of whack-a-mole.
NationPress
22 Aug 2026
Frequently Asked Questions
What did the Hyderabad CGST Zone uncover in Telangana?
CGST officers discovered an unregistered pan masala and tobacco manufacturing unit operating from a tin-shed in Medchal-Malkajgiri district, Telangana. The unit had 40 undeclared packing machines, 56 workers on site, and was clearing goods without paying GST, HSNS Cess, or Central Excise duty.
How much tax evasion was detected in the Hyderabad CGST bust?
Officials estimated total duty and cess evasion at approximately ₹160 crore, based on physical stock verification, installed machinery, workforce strength, and recorded statements. The evasion covered GST, Health Security and National Security Cess, and Central Excise duty.
Who was arrested and what is their legal status?
The person allegedly responsible for organising and managing the clandestine operations was arrested on 21 August. He was produced before the Special Judge for Economic Offences in Hyderabad and remanded to judicial custody for 14 days.
What was seized during the Medchal-Malkajgiri raid?
Seizures included approximately 5,500 kg of finished stock, ready-to-dispatch consignments worth around ₹76 lakh, 2,015 kg of pan masala mixture, 810 kg of tobacco, 40 Form-Fill-Seal packing machines, two vehicles allegedly used to transport illicit goods, and incriminating documents.
Is this part of a broader government crackdown on illegal tobacco manufacturing?
Yes. Earlier in August, the DGGI's Lucknow Zonal Unit busted a similar operation across six premises in Uttar Pradesh's Chitrakoot and Banda districts, seizing 27 undeclared pouch-packing machines used for pan masala, scented jarda, and gutkha. The back-to-back actions indicate a wider, intelligence-led enforcement drive against unregistered tobacco manufacturers.
