The Gujarat High Court has set aside a GST case after an officer used AI-generated case law that did not exist. On August 20, 2026, Justices A.S. Supehia and Vaibhavi D. Nanavati delivered the ruling.
The applicant, Faiz Enterprise, contested an SCN, GST cancellation order, revocation rejection, and appellate order. The dispute arose after the officer placed reliance on rulings that were non-existent, wrongly cited, or irrelevant.
The Court specified the issue on August 13. Thereafter, it analysed the officer’s apology and departmental reply before setting aside the proceedings.
The Court mentioned that the officer had placed reliance on AI-generated case law. It observed that the cited rulings were non-existent or irrelevant.
“It appears that the impugned order has been passed by the State Tax Officer by placing reliance exclusively on the AI-generated case laws.”
An unconditional apology was submitted by Officer Devang Arvindkumar Yadav. He mentioned that the mistake on his side arose from a lack of experience. He acknowledged using AI to draft the order and cite the rulings.
He stated that he attended an AI training programme on August 18. The court directed stringent compliance with departmental AI instructions. It mentioned that “any violation of the instructions would amount to contempt of this Court”.
The Court set aside the SCN, cancellation order, revocation rejection and appellate order. It asked the department to provide a fresh notice. It directed the authority to admit the applicant’s defence and pass a reasoned order.
AI norms have been issued by the Gujarat State Tax Department on August 18 after the court flagged the use of non-existent AI-generated case law.
Read Also: Gujarat HC Retains GST Levy on Corporate Guarantees, Strikes Down ‘Whichever Is Higher’ Provision
AI rules of the State Tax Department: The court ordered the department to comply with the guidelines of August 18. Any breach shall be referred to as contempt. The rules mandate-
- Independent Verification of Information:
- Officers should check AI-identified laws and cases via primary official sources.
- Case Law Citation Verification:
- Officers should check citations, relevance, authenticity, and current legal status.
- Authenticity of the Text:
- Officers are required to locate original paragraphs when AI paraphrases legal reasoning. They should reproduce them repeatedly.
- Taxpayer Submissions and Representations:
- Officers should acknowledge judgments specified by taxpayers. They should record reasons for denying their relevance.
- Importance of Human Oversight
- Officers are required to retain human supervision while utilising AI and other technological tools.
- Independent Legal Reasoning
- AI can support reasoning but cannot supersede the officer’s application of law and facts.
| Case Title | Faiz Enterprise vs. State Tax Officer |
| Case No. | APPLICATION NO.10123 of 2026 |
| Petitioner(s) No. 1 | Mr. Hardik V Vora |
| Respondent(s) No. 1,2 | Mr. Raj Tanna |
| Gujarat High Court | Read Order |
