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Vijay Ghanshyam Gadiya v. Union of India

Civil Appeal · 2026 INSC 947Decided 2 Sept 2026
C.A. No.-012155-012155 - 2026 (arising from SLP (Civil) No. 15605 of 2026)
Justice Dipankar Datta · Justice Sheel Nagu

Background

The Additional Commissioner of Customs, Surat, imposed a massive penalty of over Rs. 425 crore on Vijay Ghanshyam Gadiya under Section 114 of the Customs Act, 1962, for allegedly mis-declaring a consignment of natural diamonds as lab-grown diamonds to pay a lower tariff. His challenge to this penalty failed before the Gujarat High Court. Before the Supreme Court, the appellant argued that several of the judgments and articles cited by the Customs Commissioner in the penalty order were generated using Artificial Intelligence.

Decision Breakdown

The Supreme Court independently verified the citations relied upon in the Customs order and found that some of the case laws cited were entirely non-existent or carried fake citations, while others, though real, did not actually support the legal propositions attributed to them: a clear case of AI hallucination. Relying on its own recent precedent (Pooja Ramesh Singh v. Jammu & Kashmir Bank Ltd.) declaring "zero tolerance" for citing unverified AI-generated material as precedent, the Court held that a decision tainted by even a trace of such fake or hallucinated material is "no decision in the eyes of law" and must be set aside, regardless of whether the fake material actually influenced the outcome. The Court set aside both the High Court's order and the original Customs penalty order, and sent the matter back to be decided afresh by a different officer of the same rank, while leaving it to the appointing authority to consider action against the officer who passed the flawed original order.

Lesson Learnt

Government and quasi-judicial authorities cannot rely on AI-generated case law or citations without independently verifying them: an order built even partly on fabricated or hallucinated "precedent" is void and will be struck down, underscoring that AI can assist decision-making but can never replace the human duty to verify and adjudicate.

Official source (sci.gov.in)View Judgment (PDF)

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