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Civil · Reportable judgment

Vijay Ghanshyam Gadiya vs Union of India & Anr.

Court
Supreme Court of India
Date
2 September 2026
Case No.
Civil Appeal No. 12155 of 2026
Result
Allowed
Bench
Dipankar Datta, Sheel Nagu
Citation
[2026] 9 S.C.R. 423 : 2026 INSC 947
Acts & Sections
Customs Act, 1962
Supreme Court Reports [2026] 9 S.C.R. 423 : 2026 INSC 947
Issue for consideration
Issue arose as regards the Artificial Intelligence generated judgments and articles cited/relied upon by the second respondent in the order passed by the Additional Commissioner.
Headnote

Artificial Intelligence-AI – Use of AI in adjudicatory process – Hallucination of AI – Reliance on fake AI generated judgments and articles – Additional Commissioner of Customs passed an order imposing a penalty of Rs.425 crores on the appellant, for misdeclaring a consignment – Appellant challenged the penalty, however, the High Court dismissed the same – Appeal before this Court – Plea of the appellant that several judgments and articles cited by the second respondent in the Order passed by the Additional Commissioner are generated using AI – Interference:

Held: Called for – Upon verifying the judgments and articles cited by the second respondent, it does appear that the second respondent has relied upon case laws that are either non-existent or have fake citations – Investigation also revealed that some of the case laws relied upon by the second respondent, which do exist, do not lay down the ratio deduced therefrom and it appears to be a hallucination of AI – Use of AI in the process of adjudication is not foreign – Notwithstanding the Regulations for Use of Artificial Intelligence in Courts, 2026, which is yet to be finalised, use of AI as an assistive tool to speed up the decision making process cannot be denied – However, a note of caution must be sounded, assistance can never be substituted for adjudication – AI may well serve as training wheels but entrusting it with the pilot’s seat would be both imprudent and dangerous – On facts, use of AI, resulting in reliance placed by the second respondent on material which is dubious, proves fatal to the sustainability of the order imposing penalty on the appellant – Matter to be remanded back – Impugned order of the High Court set aside along with the order passed by the Additional Commissioner – Furthermore, left to the wisdom of the appointing authority to initiate action against the said Additional Commissioner, as may be warranted in the circumstances. [Paras 4, 6-8, 11]

Keywords: Artificial Intelligence-AI · Use of AI in adjudicatory process · Hallucination of AI · Reliance on fake AI generated judgments and articles · Misdeclaration of consignment · Penalty

As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.

Full Judgment Text

Order Dipankar Datta, J. 1. Leave granted. 2. The Additional Commissioner of Customs, Surat 1 passed an Order-in-Original dated 8th October, 2025 imposing a penalty of Rs. 425,27,99,100/- on the appellant, under Section 114 of the Customs Act, 1962, for mis-declaring a consignment of natural diamonds as lab-grown diamonds to pay a lower tariff. The challenge laid to the said penalty by the appellant before the High Court of Gujarat2 failed, as his appeal stood dismissed vide order dated 20th January, 2026. This order of High Court is impugned before us. 3. Entering into the merits of the c
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