ASSISTANCE CANNOT SUBSTITUTE ADJUDICATION”: SUPREME COURT SETS ASIDE CUSTOMS ORDER BASED ON FAKE AI CITATIONS

INTRODUCTION

The Hon’ble Supreme Court of India recently addressed a critical and emerging challenge in the justice delivery system. the reliance on hallucinated precedents generated by Artificial Intelligence. In Vijay Ghanshyam Gadiya v. Union of India & Anr. (Civil Appeal arising out of SLP (Civil) No. 15605 of 2026), decided on September 02, 2026, a Two-Judges Bench comprising Hon’ble Justices Dipankar Datta and Sheel Nagu delivered a significant verdict on the sanctity of adjudication. The Court made it strictly clear that orders founded upon unverified, AI-generated case laws hold no validity in the eyes of the law, establishing a firm boundary for the use of technology in legal decision-making.

BRIEF FACTS

The dispute originated from an Order-in-Original passed by the Additional Commissioner of Customs, Surat, on October 8, 2025. The Authority imposed a massive penalty of Rs. 4,25,27,99,100/- on the Appellant under Section 114 of the Customs Act, 1962, alleging that a consignment of natural diamonds was mis-declared as lab-grown diamonds to evade appropriate tariffs. The Appellant’s challenge against this exorbitant penalty was initially dismissed by the High Court of Gujarat vide an Order dated January 20, 2026. Aggrieved by the High Court’s dismissal, the Appellant approached the Supreme Court. During the proceedings, a startling revelation emerged, the Appellant contended that the Adjudicating Authority had heavily relied on Judgments and Articles that were generated by Artificial Intelligence.

ISSUES OF LAW

The Apex Court focused its evaluation on fundamental legal questions regarding the integrity of the adjudicatory process and the advent of AI:

• Whether a judicial or quasi-judicial order can sustain legal scrutiny if it relies upon non-existent or hallucinated precedents generated by Artificial Intelligence.
• Whether the reliance on fake citations by an adjudicating authority vitiates the entire decision-making process, regardless of the merits of the case.
• What are the permissible limits for utilizing Artificial Intelligence tools in court proceedings and administrative adjudications.

ANALYSIS OF THE JUDGMENT

The Supreme Court took a sharp, principled stance against the careless application of AI in legal drafting and adjudication, laying down the following key observations:

• Zero-Tolerance for Fake Precedents:Upon verifying the cited case laws, the Court discovered that the Additional Commissioner had indeed relied on non-existent cases, fake citations and existing cases that did not lay down the deduced legal ratio, a clear instance of AI hallucination. Relying heavily on the precedent set in Pooja Ramesh Singh v. Jammu & Kashmir Bank Ltd. (2026 SCC OnLine SC 1258), the Court reiterated a strict zero-tolerance policy. It noted that an Advocate citing such unverified judgments commits misconduct and a Judge relying on them commits a serious lapse.
• Sanctity of Adjudication:The Bench noted that any decision influenced by fake or hallucinated material is “no decision in the eyes of the law“. The Court definitively ruled that such decisions must be set aside to maintain the integrity of the decision-making process, even if the fabricated material had only an indirect bearing on the outcome.
• AI as an Assistant, Not an Adjudicator:While acknowledging the recently released draft Regulations for Use of Artificial Intelligence in Courts, 2026, the Court clarified that utilizing AI to speed up processes is not prohibited. However, it issued a strong caveat: “assistance can never be substituted for adjudication”. The Court elegantly summarized this by stating that while AI can serve as “training wheels,” entrusting it with the “pilot’s seat” is both imprudent and dangerous.

CONCLUSION

Finding that Adjudicating Authorities cannot base penal Orders on dubious, AI-generated legal material, the Hon’ble Supreme Court granted absolute relief to the Appellant. The Court allowed the Civil Appeal, setting aside the Impugned Order of the High Court as well as the Order-in-Original. The Court revived the proceedings, remanding the matter to be decided afresh by an officer of the same rank, explicitly excluding the author of the flawed October 8, 2025 Order. Furthermore, the Court left it open for the appointing authority to take appropriate action against the Officer responsible for the lapse, sending a strong deterrent message across the legal and administrative fraternity.

ANIKET KUMAR PARCHA

Legal Associate

The Indian Lawyer & Allied Services

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