A salt by artisan producer Hebridean Sea Salt contains 80% table salt imported from elsewhere, according to a food watchdog.
The firm has been accused of "deceiving" customers by Food Standards Scotland (FSS).
Founded by Natalie Crayton in 2011, the company claimed the salt was "hand-produced from the very beginning" using the Hebrides' pristine waters.
Earlier in the week, Ms Crayton told a newspaper that an FSS investigation had been heavy-handed and "destroyed" her business.
In response, FSS took the unprecedented step of disclosing the issue which led to its investigation.
The government agency said in a statement: "This is not simply a case of mislabelling.
"Investigations discovered that over 80% of the salt found in Hebridean Sea Salt did not originate in the Hebrides but was imported table salt.
"It is Food Standards Scotland's view that, whilst this is not a food safety issue, deception of consumers on this scale is not acceptable and could damage Scotland's well-deserved reputation for high quality, authentic food and drink products."
Hebridean Sea Salt, based on the Isle of Lewis, has been used in top restaurants and recently secured distribution deals for major supermarkets like Sainsbury's.
The company branded its products "as pure as nature," saying they made "white crunchy sea salt flakes that melt in the mouth".
The investigation is being led by Western Isles council with FSS playing a supporting role.
It is understood concerns around authenticity were raised by a former employee and the firm is no longer operating as its stock was seized.
Earlier, Ms Drayton said the issue which prompted the investigation had been resolved.
She told The Herald: "This is not a food safety issue - it is a labelling issue which has been resolved.
"The salt I added is pure food-grade sea salt with no additives.
"Yet my business has been destroyed by the behaviour of Food Standards Scotland, which hid behind Western Isles council environmental health officers to enforce my closure."
The dispute is over the issue of "seeding" Hebridean water with foreign salt crystals, a practice Ms Crayton says is common in top brands.