CGST Uncovers Major Tax Evasion Scheme in Gurgaon Pan Masala Manufacturing
In a significant crackdown on financial fraud, the Central Goods and Services Tax (CGST) department has dismantled a sophisticated tax evasion racket valued at approximately Rs 10 crore. The operation targeted pan masala manufacturing units located in Gurgaon and Mewat, revealing a clandestine network designed to bypass statutory taxes.
Arrest and Judicial Custody of Key Accused
During the raid, CGST officials arrested Vijay Kumar Agarwal, identified as the mastermind behind the illegal activities. Agarwal, who is also involved in the real estate business, allegedly orchestrated the scheme by appointing his employees as dummy directors in the companies to conceal ownership and operations. He was produced before an additional chief judicial magistrate court and remanded to 14 days of judicial custody, pending further investigation.
Details of the Tax Evasion and Seizures
The CGST department seized several unregistered machines that were operating covertly at the units. Preliminary estimates indicate that the evasion of central excise duty alone amounts to over Rs 8 crore, along with applicable cess, for a brief period from February 1, 2026, to March 31, 2026. This short timeframe highlights the scale and intensity of the illicit operations.
According to officials, the units were engaged in large-scale unaccounted production and supply of pan masala and jarda—a processed chewing tobacco used with paan—to evade statutory taxes. The investigation points to deliberate suppression of production and clandestine removal of excisable goods, violating CGST regulations that require manufacturers to pay Rs 1 crore per machine annually, in addition to GST on finished products.
Systematic Setup to Bypass Regulations
The raid uncovered a systematic setup meticulously designed to avoid registration and underreport production. The companies had established operations at undeclared premises and utilized unregistered machinery for manufacturing. No statutory records or declarations regarding production or machinery were maintained, constituting a clear breach of legal provisions.
ACP (CGST HQ) Karan Singh stated that the Gurgaon unit initiated investigations based on specific intelligence into the clandestine manufacturing and clearance of pan masala and scented jarda products by two companies registered in Gurgaon and Mewat. During search operations, officers seized large quantities of raw materials, finished goods, incriminating documents, and 10 undeclared manufacturing and packing machines—comprising five pan masala packing machines and five zarda packing machines.
Ongoing Investigation and Recovery Efforts
CGST officials have launched comprehensive proceedings to recover tax dues, impose penalties, and assess the total evasion amount. A CGST officer emphasized that the investigation is ongoing to uncover the complete modus operandi and identify other beneficiaries involved in the racket. This crackdown is part of an intensified drive to curb tax leakage in the pan masala and tobacco sector, which is known for high revenue risks due to such evasion practices.
The case underscores the CGST department's commitment to enforcing tax compliance and tackling financial fraud in critical industries. As the probe continues, further details are expected to emerge regarding the extent of the network and potential connections to other illicit activities.
