The Department of Revenue Investigation (DRI) has filed a case against 12 individuals, including Silk Group chairperson Ramesh Sherpa, for their alleged involvement in large-scale illegal trade of Chinese electronic cigarettes (vapes).

The case, lodged at the Lalitpur District Court on Thursday, seeks prison terms along with fines totalling nearly Rs17.5 billion.

Authorities say the smuggling network operated under the guise of legitimate trade, using nearly 100 shipping containers to transport goods from China.

The investigation gathered pace after a dramatic raid on January 7, when 86,400 vapes were seized from a Silk warehouse in Mahalaxmi Municipality-4, Sitallheight.

The following day, more documents and computer devices were confiscated from other company sites in Balkumari and Naxal. These findings, the DRI said, directly implicated Sherpa, along with his brother-in-law and Silk employee, Vijay Sherpa.

Despite the government’s ban on vape imports, authorities discovered the devices were being openly sold in major cities, including Kathmandu. Investigators allege that Sherpa smuggled the products through the Tatopani customs point, bypassing health ministry restrictions. He has since gone out of contact.

According to DRI spokesperson Krishna Kumari Shrestha, the case also names warehouse operator Mahesh Prasad Pathak and Silk employee Santosh Parajuli as accomplices, with the department demanding half the sentence sought for the main defendants.

Evidence shows Silk and its associated firms sold nearly 39,000 vapes without bills, fabricated purchase records, and created multiple layers of fake transactions to evade VAT.

In total, investigators claim the group smuggled more than 316,000 vapes, causing revenue losses estimated at Rs873 million.

The court filing demands recovery of this amount along with an equal fine, bringing the total sought from defendants to over Rs1.74 billion. The department has also asked for maximum prison terms for Ramesh, Vijay and 10 others, while seeking reduced sentences for Pathak and Parajuli for their secondary roles.

Officials said further investigations remain ongoing, with some confiscated vapes still held in Tatopani customs warehouses.