The Supreme Court on Wednesday set aside an order issued by a customs officer in Gujarat slapping a penalty of ₹ 425 crore against a diamond trader which had relied upon AI-generated case laws that did not exist.
SC leaves action against officer to appointing authority
Setting aside the order of October 8, 2025 passed by the Additional Commissioner of Customs, Surat, the court remanded the matter back to the same authority requiring that the case be decided not by the same individual but by an officer of the same rank. The appeal was filed before the court by the aggrieved trader, Vijay Ghanshyam Gadiya, who was slapped with a penalty of ₹ 425.27 crore under Section 114 of the Customs Act, 1962, for misdeclaring a consignment of natural diamonds as lab-grown diamonds to pay a lower tariff.
“ Artificial Intelligence (AI) may well serve as training wheels but entrusting it with the pilot’s seat would be both imprudent and dangerous,” the bench said.
The court said that the use of AI is not prohibited as it can always be an “assistive tool” that can expedite the decision-making process. However, sounding a note of caution, the bench said, “Assistance can never be substituted for adjudication,” as it noted the fallout of this mistake in this case.
