Vijay Ghanshyam Gadiya vs Union Of India

REPORTABLE
2026 INSC 947

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION


CIVIL APPEAL NO. OF 2026
[ARISING OUT OF SLP (CIVIL) NO. 15605 OF 2026]



VIJAY GHANSHYAM GADIYA … APPELLANT


VS.


UNION OF INDIA & ANR. … RESPONDENTS



O R D E R
DIPANKAR DATTA, J.

1. Leave granted.
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2. The Additional Commissioner of Customs, Surat passed an Order-in-
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Original dated 8 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
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the High Court of Gujarat failed, as his appeal stood dismissed vide order
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dated 20 January, 2026. This order of High Court is impugned before us.
Signature Not Verified
Digitally signed by
MANIK KUMAR
Date: 2026.09.02
18:46:38 IST
Reason:

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second respondent
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High Court
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3. Entering into the merits of the challenge is unnecessary, since it has
been contended on behalf of the appellant that several judgments and
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articles cited by the second respondent in the Order-in-Original dated 8
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October, 2025 are generated using Artificial Intelligence .
4. We have made the effort to individually verify whether such
contention of the appellant is true. Upon verifying such judgments and
articles, it does appear that the second respondent has relied upon case
laws that are either non-existent or have fake citations. A further
investigation has 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.
5. Such a discovery compels us to refer to the decision of this Court in
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Pooja Ramesh Singh v. Jammu & Kashmir Bank Ltd. . It happens to
be a precedent dealing with the use of AI in judgments. Excerpts therefrom
read:
7. It is necessary for courts to adopt a zero-tolerance mode for producing,
citing or using artificial intelligence-generated precedents without
verification. It is a misconduct on the part of an advocate to cite such
judgments without verification. Equally, it is a serious lapse if a judge relies
on such a fake or hallucinated artificial intelligence-generated material as
precedents in support of the determination. We have no hesitation in
declaring that such a decision is no decision in the eyes of the law,
irrespective of whether such material had a direct or indirect bearing on the
decision-making. Such decisions are to be set aside even if an iota of fake
or hallucinated material enters the decision-making process, as it would
violate the sanctity of adjudication. It is absolutely necessary to maintain
integrity in decision page making, and we reiterate and declare zero
tolerance for the Bar as well as the Bench to cite, refer to, or rely on such
material. It is also clarified that our judgment shall have no bearing on the
rightful use of artificial intelligence, but on the presentation or reliance on
fake or hallucinated material as if it were a court precedent.

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AI
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2026 SCC OnLine SC 1258
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6. At this juncture, we may also add a comment on the use of Artificial
Intelligence in adjudicatory processes. While this issue incidentally falls
upon us to be considered, use of AI in the process of adjudication is not
foreign. Quite the contrary, this Court has recently released draft
Regulations for Use of Artificial Intelligence in Courts, 2026, calling for
comments and suggestions. Notwithstanding that the regulations are 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.
7. The use of AI in this case, 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. Such circumstances compel
us to interfere and remand the case. Learned Additional Solicitor General
has not joined issue.
8. For the foregoing reasons, the impugned order of the High Court
confirming the penalty is consequently set aside together with the Order-
in-Original, with the result that the proceedings against the appellant
before the second respondent shall stand revived for being decided afresh
by an officer of the same rank other than the one who passed the order
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dated 8 October, 2025.
9. The civil appeal stands allowed.
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10. Pending application(s), if any, stand disposed of.
11. We leave it to the wisdom of the appointing authority to initiate such
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action against the author of the order dated 8 October, 2025, as may be
warranted in the circumstances, in accordance with law.



………..……………………………J.
(DIPANKAR DATTA)





…….……..…………………………J.
(SHEEL NAGU)
NEW DELHI;
SEPTEMBER 02, 2026.










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