The Karnataka commercial tax department found undeclared arecanut valued at Rs 11 crore from godowns raided at Shivamogga and Sagara in the state's Malenadu region, an official said on Friday.

"Godowns and premises of arecanut merchants were raided at Shivamogga and Sagara towns. This was based on a tip-off that a huge quantity of arecanut was purchased and stored by traders without documents during the COVID-19 induced lockdown in the state," the tax official said in a statement. The department collected Rs 1.10 crore as Goods and Services Tax (GST) with penalty from the merchants on the unspecified quantity of arecanut.

Shivamogga is about 300 km northwest of Bengaluru in the southern state of Karnataka, while Sagara is about 70 km away from Shivamogga.

The South Zone Enforcement Additional Commissioner Nitesh Patil led the raiding team in nine places at Shivamogga and four places at Sagara on Tuesday after keeping a close watch on the premises and movement of the goods.

"Inspection of books revealed unaccounted-for transactions and a suppressed turnover which quantified so far was worth Rs 11 crore," according to the statement.

Large quantities of arecanut are grown in Shivamogga, Chitradurga and Davanagere districts and sold to traders in northern states for use as an ingredient in paan (betel nut) and making ‘supari' or ‘ghutka'.

As the transactions were off the books, the information will be shared with the APMC (Agricultural Produce Market Committee) yard in the district so that they take action against the merchants.

"Preliminary investigation also showed some merchants obtained tax invoices from fictitious traders in Tamil Nadu to claim fake input tax credit," added the official.

The Hindu reported that the tax department is said to be on the lookout for similar GST violations during the lockdown. Other sectors are also under the scanner.