Case Details
Case: Faiz Enterprise Through Proprietor Mahetar Mahir Farukbhai v. State Tax Officer, Unit-67, Surat & Anr.
Court: High Court of Gujarat at Ahmedabad
Bench: Justice A.S. Supehia and Justice Vaibhavi D. Nanavati
Case No.: R/Special Civil Application No. 10123 of 2026
Neutral Citation: GJHC240484212026
Date of Judgment: 20 August 2026
Decision: In favour of the petitioner; proceedings quashed with liberty to issue a fresh notice.
Headnote
GST adjudication based on unverified AI-generated case laws—Adjudicating officer admitted citing non-existent and irrelevant judgments—Gujarat High Court quashed the show-cause notice, registration-cancellation order, revocation-rejection order and appellate order—Department permitted to initiate fresh proceedings—Official instructions governing AI-assisted adjudication directed to be followed scrupulously.
Background
Faiz Enterprise challenged the proceedings culminating in the cancellation of its GST registration. During the hearing, the petitioner pointed out that the State Tax Officer had relied upon judicial decisions that either did not exist, carried incorrect citations or were unrelated to the issue under consideration.
The decisions referred to in the impugned order included State of Gujarat v. Aarbee Structures Pvt. Ltd., M/s Sri Vinayaga Agencies v. Assistant Commissioner and Jyoti Tar Products Pvt. Ltd. v. Deputy Commissioner. The petitioner submitted that the first decision was non-existent, while the citations and legal principles attributed to the remaining decisions did not correspond with the actual judgments.
In its interim order dated 13 August 2026, the High Court observed that the impugned order appeared to have been passed by relying exclusively on AI-generated case laws. The Court consequently called upon the State authorities to obtain appropriate instructions.
Adjudicating Officer’s Apology
The State Tax Officer who passed the impugned order appeared before the Court and filed an affidavit tendering an unconditional apology. He acknowledged that Artificial Intelligence had been used while drafting the order and that the judgments referred to were non-existent or irrelevant.
The officer stated that he was a probationary officer and that the mistake had occurred because of his lack of experience. He also informed the Court that he had subsequently attended a training programme concerning the use of Artificial Intelligence in drafting writ-related documents and adjudication or appellate orders.
Departmental Instructions on the Use of AI
Following the Court’s intervention, the Additional Commissioner of State Tax (Administration), Gujarat issued instructions dated 18 August 2026 governing the use of AI by adjudicating and quasi-judicial authorities.
The instructions require that:
- Every judgment, statutory provision, rule, circular or notification identified through AI must be independently verified from primary official sources.
- Authorities must verify the accuracy, relevance, authenticity and current legal status of judicial precedents.
- Where an AI tool paraphrases a judicial ratio, the original paragraph must be located and reproduced before reliance is placed upon it.
- Judgments cited by taxpayers must be duly considered, and reasons must be recorded if they are held to be inapplicable.
- AI-assisted research must always be accompanied by appropriate human oversight.
- Orders must reflect the authority’s independent reasoning and application of mind.
- The issuing authority remains responsible for the correctness of the order, irrespective of the technology used.
- Reliance on unverified AI-generated material may constitute misconduct and attract disciplinary action.
The High Court directed that these instructions must be followed scrupulously. It further declared that violation of the instructions would amount to contempt of Court.
Findings and Decision
On the merits, the State informed the Court that the authorities intended to revise the impugned orders by resorting to Section 108 of the GST Act, 2017. The Department also expressed its willingness to issue a fresh show-cause notice and undertake fresh adjudication.
Taking note of the Department’s fair stand, the High Court quashed and set aside:
- The show-cause notice dated 30 October 2025;
- The GST registration-cancellation order dated 15 December 2025;
- The order dated 10 March 2026, issued on 23 March 2026, rejecting the revocation application;
- The appellate order dated 25 May 2026; and
- GST APL-04 dated 26 May 2026.
The respondent authority was permitted to issue a fresh notice to the petitioner. The Court directed the petitioner to cooperate with the proceedings and required the authority to consider the petitioner’s reply and defence before passing a reasoned order in accordance with law.
All rights and contentions of the parties were left open, and the petition was disposed of.
Legal Significance
The judgment makes it clear that Artificial Intelligence may assist a tax authority in legal research or drafting, but it cannot replace independent verification, human oversight and judicial application of mind. An adjudication order founded on fabricated, incorrectly cited or irrelevant precedents cannot be sustained merely because those authorities were produced through an AI tool.
The responsibility for the factual and legal correctness of an order continues to rest entirely with the adjudicating authority.
[…] Click to view […]