New Delhi, August 21, 2026: The Directorate General of Goods and Services Tax Intelligence (DGGI) has busted an illegal production network involved in the manufacture of pan masala and tobacco products in Uttar Pradesh, detecting suspected tax evasion of around ₹185 crore.

During the operation, DGGI officials seized 27 undeclared pouch-packing machines from six production premises located in Chitrakoot and Banda. Around 15.5 lakh pouches of finished products were also seized.

The owner of the network has been sent to judicial custody in connection with the case.

The action comes amid the implementation of a capacity-based levy and taxation regime for pan masala under the Health Security to National Security Cess Act, 2025. Central excise duty on chewing tobacco, zarda and gutkha under the Central Excise Act, 1944 also came into effect from February 1, 2026.

According to the DGGI, its units have registered 27 cases since February 1, 2026, involving alleged concealment of production, clandestine removal of goods and evasion of applicable taxes and cess.

Across these cases, DGGI has detected evasion of approximately ₹668 crore in duties, taxes and cess. A total of 131 pouch-packing machines have been seized and 17 persons have been arrested in connection with such cases.

The latest action in Uttar Pradesh highlights the government's continued efforts to curb tax evasion and illegal manufacturing activities in the pan masala and tobacco sector.