The Supreme Courtroom on Wednesday put aside a ₹425.27-crore customs penalty imposed on a diamond dealer after discovering that the adjudicating authority had relied on non-existent or incorrectly cited judicial precedents that appeared to have been generated or hallucinated by synthetic intelligence.
A Bench comprising Justice Dipankar Datta and Justice Sheel Nagu allowed the civil enchantment filed by one Vijay Ghanshyam Gadiya and quashed each the Gujarat Excessive Courtroom order and the unique customs adjudication order.
The penalty had been imposed by the Further Commissioner of Customs, Surat, on October 8, 2025, beneath Part 114 of the Customs Act, 1962. The appellant had been accused of mis-declaring a consignment of pure diamonds as lab-grown diamonds so as to pay a decrease tariff. The Gujarat Excessive Courtroom subsequently dismissed his problem to the penalty on January 20, 2026.
Pretend Citations used
Earlier than inspecting the deserves of the customs dispute, the Supreme Courtroom thought of the appellant’s rivalry that a number of judgments and articles cited within the unique order had been generated utilizing AI.
The Bench mentioned it independently verified the cited materials and located that a few of the instances relied upon have been non-existent or carried pretend citations. It additional discovered that some instances did exist however didn’t set up the authorized propositions attributed to them, describing this as an obvious “hallucination of AI.”
Upon verifying such judgments and articles, it does seem that the second respondent has relied upon case legal guidelines which are both non-existent or have pretend citations. An additional investigation has additionally revealed that a few of the case legal guidelines relied upon by the second respondent, which do exist, don’t lay down the ratio deduced therefrom and it seems to be a hallucination of AI.
The Courtroom referred to its current resolution in Pooja Ramesh Singh v. Jammu & Kashmir Bank Ltd., which had careworn a zero-tolerance strategy in the direction of using unverified AI-generated authorized precedents. It famous that advocates citing such materials with out verification might commit misconduct, whereas judicial reliance on pretend or hallucinated precedents would represent a severe lapse affecting the integrity of adjudication.
AI can help, however can’t change adjudication
The Bench additionally issued a phrase of warning warning on using synthetic intelligence in judicial and adjudicatory processes.
The bench famous that Supreme Court has published draft Regulations for Use of Artificial Intelligence in Courts.
“However that the laws are but to be finalised, use of AI as an assistive software to hurry up the decision- making course of can’t be denied. Nevertheless, a word of warning should be sounded: help can by no means be substituted for adjudication. AI could nicely function coaching wheels however entrusting it with the pilot’s seat could be each imprudent and harmful.”
The Courtroom held that the reliance on doubtful materials was deadly to the sustainability of the customs penalty. It subsequently put aside the Gujarat Excessive Courtroom’s order in addition to the October 2025 Order-in-Unique.
The proceedings have been revived for recent adjudication by an officer of the identical rank, however not the officer who handed the unique order. The Courtroom additionally left it to the appointing authority to determine whether or not motion ought to be taken towards the creator of the unique order in accordance with regulation.
Case : Vijay Ghanshyam Gadiya v Union of India and One other
Quotation : 2026 LiveLaw (SC) 884
Click here to read the judgment
Associated – Citing AI-Generated Fake Precedents Is Advocate Misconduct; Judgments Based On Them Are Void : Supreme Court
