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India's Supreme Court sets aside customs penalty over AI-hallucinated citations

The Supreme Court of India set aside a Rs 425.28 crore customs penalty after finding fake or misused AI-generated authorities in the order.

Edited and verified by Cognesio LLP

Researched with AI assistance · sources verified by Cognesio LLP · How this was made ↓

The Supreme Court of India set aside a customs penalty on 2 September 2026 after finding that the customs adjudicator’s order relied on non-existent or misdescribed authorities said to have been generated using AI.

The order in Vijay Ghanshyam Gadiya v Union of India, 2026 INSC 947, concerned a Rs 425,27,99,100 penalty imposed by the Additional Commissioner of Customs, Surat on 8 October 2025. The Supreme Court did not decide the customs merits. It set aside both the Gujarat High Court order and the customs order, and sent the matter to a different officer.

What did the Court say?

Justice Dipankar Datta, for a bench with Justice Sheel Nagu, recorded that the Court had checked the cited material itself. Paragraph 4 says some authorities were non-existent or had fake citations, and that some real cases did not support the propositions attributed to them.

The operative warning is at paragraph 6:

“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.”

Paragraph 7 held that the reliance on dubious material was fatal to the penalty order. Paragraph 11 left the appointing authority to decide whether action should be taken against the officer who authored the order.

What does it mean?

  • The judgment extends India’s zero-tolerance rule for AI-hallucinated legal material beyond ordinary court judgments: an executive adjudication order can be set aside when fake authority enters the reasoning.
  • It builds on Pooja Ramesh Singh v Jammu & Kashmir Bank Ltd., where the Supreme Court said courts should set aside decisions if even an iota of fake or hallucinated material enters the decision-making process.
  • The case is now recorded both as an incident and as a regulation-tracker judgment-guidance record, because it states a verification rule for adjudicators and quotes the Court’s existing zero-tolerance rule for the Bar and Bench.

Record: Vijay Ghanshyam Gadiya v Union of India; Supreme Court judgment-guidance record.

Sources