Part of the AI Regulation News hub.
India's Supreme Court has set aside a customs penalty of more than 425 crore rupees after verifying for itself that the department's order rested on case law that does not exist
The reason this one travels is not the size of the penalty. It is that the Court applied a rule articulated for advocates and judges to a departmental officer's adjudication order.
Bottom line: Binding. Delivered 2 September 2026. It sets aside the Order-in-Original and the High Court of Gujarat's 20 January 2026 order dismissing the appeal, but expressly declines to enter the merits, so the proceedings survive.
Who this affects: Customs adjudicating officers exercising penalty powers, and practitioners who draft, review or contest customs adjudication orders in India.
Issue date: 2 September 2026. The order under challenge was the Order in Original of 8 October 2025.
What changed: A rule about fabricated citations, articulated for the Bar and Bench, was applied to invalidate the order of an executive adjudicating authority.
Analysis: The Court verified the citations itself rather than accepting the appellant's assertion. That is the part a practitioner should read twice.
Primary sources: Vijay Ghanshyam Gadiya v. Union of India, judgment of 2 September 2026
- Instrument (EN)
- Vijay Ghanshyam Gadiya v. Union of India and Another
- Authority
- Supreme Court of India, Civil Appellate Jurisdiction. Dipankar Datta J. and Sheel Nagu J.
- Jurisdiction
- India, national
- Status
- Delivered and binding. Appeal allowed, matter remanded
- Bindingness
- Binding as a judgment of the Supreme Court. It directs no disciplinary action against anyone
- Issue date / next deadline
- 2 September 2026. No deadline is set; the revived proceedings have no date fixed in the judgment
- Number
- Civil Appeal arising out of SLP (Civil) No. 15605 of 2026
- Primary source
- https://www.livelaw.in/pdf_upload/2026/09/02/vijay-ghanshyam-gadiya-v-union-of-india-and-another-697691.pdf
What did the Court actually find?
The appellant contended that judgments and articles cited in a customs Order in Original of 8 October 2025 had been generated using artificial intelligence. The Court did not take that on trust. At paragraph 4 it records: "We have made the effort to individually verify whether such contention of the appellant is true."
On verification it found the order relied on "case laws that are either non-existent or have fake citations". It added that some cited cases which do exist "do not lay down the ratio deduced therefrom and it appears to be a hallucination of AI".
Read that hedge carefully. The finding attaches to the citations and to what they appear to be. The judgment does not find that the officer personally operated an AI tool, and this piece does not say so.
Why it reaches further than the courts
The Court turned to its own decision in Pooja Ramesh Singh v. Jammu and Kashmir Bank, a precedent about fabricated authority in litigation, and applied its logic to invalidate a departmental adjudication.
That is the move worth noting, and it is worth stating precisely: the Court applied the reasoning to an executive adjudicating authority in this case. It did not hand down an express holding extending that precedent to all executive authorities, and describing it that way would overstate what is on the page.
For a practitioner the practical reach is nonetheless real. The Court treated fake or hallucinated cited authority as fatal to this adjudication order, taking the practical consequence beyond the Bar and Bench context quoted from Pooja Ramesh Singh.
What the judgment does not do
It does not extinguish the liability. The penalty order and the High Court of Gujarat's order dismissing the appeal are set aside, but at paragraph 8 the proceedings stand revived for fresh decision, by an officer of the same rank other than the one who passed the order. The Court expressly declines to enter the merits.
It directs no discipline. At paragraph 11 it leaves whether to initiate any warranted action against the order's author "to the wisdom of the appointing authority". That is permissive, and the difference matters to anyone reporting this as a sanction.
It does not disapprove of AI in adjudication. The Court says the use of AI as an assistive tool to speed up decision making "cannot be denied", while adding that "assistance can never be substituted for adjudication". Its formulation: "AI may well serve as training wheels but entrusting it with the pilot's seat would be both imprudent and dangerous."
A status fact worth extracting
At paragraph 6 the Court records that it "has recently released draft Regulations for Use of Artificial Intelligence in Courts, 2026, calling for comments and suggestions", and that "the regulations are yet to be finalised".
That is an on the record answer to a question that had been open. The judgment does not date the draft Regulations' release beyond describing them as recent, and it does not address any commencement-notification step. What the judgment does say is that the draft Regulations are yet to be finalised.
What we did not verify
What we opened: the four page judgment in full, as extracted text, including the verification passage, the citation findings, the remand direction and the paragraph on the draft Regulations. Paragraphs 1 to 11 are sequential and were read as such.
What we did not open: the Order in Original of 8 October 2025, the High Court of Gujarat order confirming it, the Pooja Ramesh Singh judgment itself, and the draft Regulations for Use of Artificial Intelligence in Courts, 2026. We therefore describe Pooja Ramesh Singh only as this judgment describes it.
A sourcing limitation we are disclosing rather than hiding. The Supreme Court's own PDF endpoint for this matter returned a WordPress error page at the time of writing, not the judgment. We read the text from a four-page copy of the order hosted by LiveLaw, and verified the case name, SLP number and signature date against that copy. We cite the Court as the authority and the copy we actually read as the link.
What we refuse to claim: we do not say the officer used AI, because the judgment does not find that. We do not say anyone will be disciplined, because the judgment leaves that to another body's discretion. We do not say the penalty has been extinguished, because the proceedings are revived. We do not say the Court formally extended Pooja Ramesh Singh to all executive authorities, because it did not say so.
Informational analysis for working professionals, not legal advice. Confirm how any rule applies to your situation with qualified counsel.
If you draft or review departmental adjudication orders in India, the consequence illustrated by this judgment is operative as well as reputational: the order was set aside and the matter went back to a different officer. The Court verified the citations itself rather than waiting for the other side to prove the point. Assume that any authority in an order you sign may be checked the same way.
Source File
Open the judgment and confirm four things: the self verification sentence at paragraph 4, the non existent and fake citations finding in the same paragraph, the remand to an officer of the same rank other than the author at paragraph 8, and the statement at paragraph 6 that the draft Regulations are yet to be finalised.
AI may well serve as training wheels but entrusting it with the pilot's seat would be both imprudent and dangerous. ยท Supreme Court of India, Vijay Ghanshyam Gadiya v. Union of India, 2 September 2026
FAQ
Did the Supreme Court find that the customs officer used AI?
No. The appellant contended the citations were AI generated. The Court verified them and found case law that is non existent or carries fake citations, and said of other cited cases that the mismatch appears to be a hallucination of AI. The finding attaches to the citations, and the Court hedged it.
Has the penalty been cancelled?
The order imposing it and the High Court of Gujarat's order dismissing the appeal are set aside, but the proceedings stand revived for fresh decision by an officer of the same rank other than the one who passed the order. The Court expressly declined to enter the merits.
Will the officer who wrote the order be disciplined?
The judgment directs no action. It leaves whether to initiate any warranted action against the author to the wisdom of the appointing authority, which is discretionary.
Does the judgment prohibit AI in adjudication?
No. It says the use of AI as an assistive tool to speed up decision making cannot be denied, while stating that assistance can never be substituted for adjudication.
Related briefings
Sponsored Training
Practical AI training for regulated professionals, built around verification, documentation and a defensible process. See the courses.