The Gujarat High Court has quashed GST proceedings against Faiz Enterprise after a State Tax Officer admitted using artificial intelligence while drafting an order that cited non-existent and irrelevant judgments. The court has also directed tax authorities to strictly follow safeguards governing the use of AI in adjudication and appellate orders.
A Division Bench comprising Justice A.S. Supehia and Justice Vaibhavi D. Nanavati passed the order on August 20 in a petition filed by Faiz Enterprise through its proprietor Mahetar Mahir Farukbhai. The case involved proceedings related to the cancellation of the firm's GST registration.
During an earlier hearing on August 13, the petitioner questioned the case laws cited by the State Tax Officer. One judgment cited in the order did not exist, while other authorities carried incorrect citations or dealt with issues unrelated to the dispute. The court subsequently observed that the order appeared to have been passed by relying exclusively on AI-generated case laws.
State Tax Officer Devang Arvindkumar Yadav later filed an affidavit tendering an unconditional apology. He informed the court that he was a probationary officer and attributed the error to his lack of experience. He acknowledged using AI in drafting the order and referring to judgments that were either non-existent or irrelevant.
Following the court's intervention, Gujarat's Additional Commissioner of State Tax issued instructions on August 18 governing the use of AI by adjudicating and quasi-judicial authorities. The guidelines require officers to independently verify case laws, statutory provisions, rules, circulars and notifications identified using AI against primary official sources.
Authorities have also been directed to verify the authenticity and current legal status of judgments and ensure that relevant decisions have not been overruled. Where an AI tool paraphrases a legal principle, officers are required to check the original judgment. The instructions further require authorities to consider judgments submitted by taxpayers and record reasons if they are found to be inapplicable.
The guidelines emphasise human oversight and state that AI can assist an officer's reasoning but cannot replace independent legal reasoning or application of mind. Responsibility for the accuracy of an order continues to rest with the authority issuing it.
The High Court directed that these instructions be followed strictly and warned that violation of its directions could amount to contempt of court.
The court quashed the earlier show cause notice, GST registration cancellation, rejection of the revocation application and subsequent appellate order. Tax authorities have been permitted to issue a fresh notice and conduct proceedings again after considering the petitioner's response and passing a reasoned order in accordance with law.
The case adds to scrutiny around the use of generative AI in legal and quasi-judicial processes, particularly where AI-generated information can enter official decisions without independent verification.
Disclaimer: This article may include information derived from interviews, press releases, public statements, research, company communications and other publicly available or third-party sources. Such material may be summarised, paraphrased or contextualised for journalistic and editorial purposes. All rights in third-party content remain with their respective owners.