Legal principle

A judicial or quasi-judicial decision that relies on fake or hallucinated artificial intelligence-generated precedents without verification is no decision in the eyes of the law and must be set aside, even if an iota of such material enters the decision-making process, as it violates the sanctity of adjudication. Zero tolerance is declared for the Bar as well as the Bench to cite, refer to, or rely on such material. While AI may serve as an assistive tool, assistance can never be substituted for adjudication.

Court decision

The Supreme Court set aside the impugned order of the High Court dated 20 January 2026 confirming the penalty, together with the Order-in-Original dated 8 October 2025. The proceedings against the appellant were remanded for being decided afresh by an officer of the same rank other than the one who passed the order dated 8 October 2025. The civil appeal was allowed.

Facts

The Additional Commissioner of Customs, Surat passed an Order-in-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 appellant's appeal before the High Court of Gujarat was dismissed vide order dated 20 January 2026. The appellant contended that several judgments and articles cited by the Additional Commissioner of Customs in the Order-in-Original dated 8 October 2025 were generated using Artificial Intelligence (AI). Upon verification, the Supreme Court found that the Additional Commissioner had relied upon case laws that were either non-existent or had fake citations, and some existing case laws did not lay down the ratio deduced therefrom and appeared to be a hallucination of AI.

Key provisions

• Section 114, Customs Act, 1962 — Penalty for attempt to export goods improperly etc