AIFoPa-2026-0030 — Four Hundred and Twenty-Five Crore
India’s Supreme Court set aside a customs penalty of ₹425,27,99,100 after finding that the officer who imposed it had relied on judgments that do not exist.
The Additional Commissioner of Customs at Surat issued the order on 8 October 2025. It imposed a penalty of ₹425,27,99,100. A crore is ten million rupees, so that is four hundred and twenty-five crore. The charge was misdeclaration. A trader had entered natural diamonds on his paperwork as laboratory-grown ones.
An adjudicating authority is a customs officer who decides such a charge. The officer is not a judge. The order carries the force of a decision until a court sets it aside. This one was challenged. The Gujarat High Court confirmed it on 20 January 2026.
The order cited case law in support of its reasoning. The Supreme Court of India checked the citations. Several of the judgments do not exist. Others exist and say nothing resembling what the order attributed to them.
The bench was Justice Dipankar Datta and Justice Sheel Nagu. Judgment was delivered on 2 September 2026 in Vijay Ghanshyam Gadiya v. Union of India. The bench described the cited material as a hallucination of artificial intelligence. That is the court’s account of how the citations arrived. No admission by the officer has been reported.
The bench chose a metaphor. Artificial intelligence, it said, “may well serve as training wheels”. Entrusting it “with the pilot’s seat would be both imprudent and dangerous”. It held that “assistance can never be substituted for adjudication”.
The Supreme Court set aside the penalty. It set aside the High Court order that had confirmed it. It sent the case back to Surat, to a different officer of the same rank. The appointing authority is the body that appoints and disciplines such officers. The court left it to that body to consider whether to look into the officer who wrote the first order.
₹425,27,99,100 rested on the order’s reasoning. The reasoning rested on the citations. The citations rested on nothing.
Nothing has been decided about the diamonds. The trader has not been cleared and has not been penalised. The Bureau files this record against the order, not against the charge. The charge is where it was on 8 October 2025, with ten months and twenty-five days added to it.
The allegation was that goods had been entered as something they were not. The order making that allegation cited authorities that were not authorities. Two questions were before the court. It answered the smaller one.