Gujarat High Court Quashes Faiz Enterprise GST Orders Over AI Case Laws

AI-Generated Citations Lead to Quashed Orders

A Division Bench of the Gujarat High Court quashed a series of GST orders against Faiz Enterprise after discovering that the adjudicating officer had relied exclusively on artificial intelligence (AI) to generate case law citations, several of which were non-existent or irrelevant to the case. Justices A.S. Supehia and Vaibhavi D. Nanavati held that such reliance vitiates the quasi-judicial process and issued binding instructions on the use of AI by tax authorities.

Officer Apologizes, Department Issues New Guidelines

During the hearing on August 13, 2026 , the petitioner’s counsel, Hardik V. Vora , pointed out that the State Tax Officer, Unit-67, Surat, had cited judgments that did not exist—including a purported Gujarat High Court case—and others with incorrect citations or inapplicable ratios. The court observed that it "appears that the impugned order has been passed by the State Tax Officer by placing reliance exclusively on the AI generated case laws ."

When the matter was taken up again on August 20 , the officer, Mr. D.A. Yadav, personally appeared and tendered an unconditional apology. In his affidavit , he admitted to using AI in drafting the order and attributed the mistake to his lack of experience as a probationary officer. He stated that he had since attended a training programme on "usage of Artificial Intelligence (AI) in Drafting SCA and adjudication/appellate order" conducted on August 18, 2026 .

Responding to the court’s order, the Additional Commissioner of State Tax (Admin), A.B. Mehta, issued statewide instructions dated August 18, 2026, prescribing stringent safeguards for AI use by adjudicating and quasi-judicial authorities.

Court's Directives: AI Can Assist, Not Substitute Reasoning

The court incorporated the department’s new instructions into its order and directed strict compliance, warning that any violation would amount to contempt. The key safeguards include:

  • Every case law, statutory provision, rule, circular, or notification identified through AI must be independently verified using primary official sources before being included in an order.
  • Officers must verify the authenticity, current legal status, and relevance of each citation, and reproduce original paragraphs verbatim when AI paraphrases a ratio.
  • AI output may assist in reasoning but cannot substitute the officer’s own independent application of mind.
  • The ultimate responsibility for the correctness of an order lies with the issuing authority, regardless of technological tools used.
  • Failure to comply—including passing orders based on unverified AI content—amounts to misconduct and may attract disciplinary action.

What the Court Said

The court’s key observations underscored the peril of unverified AI reliance:

"It appears that the impugned order has been passed by the State Tax Officer by placing reliance exclusively on the AI generated case laws ."

And on compliance:

"We direct that the instructions dated 18/08/2026, which we have incorporated in our order shall be scrupulously followed, and any violation of the instructions would amount to contempt of this Court ."

Final Decision and Fresh Start

Taking a fair stance, the State authorities agreed to revise the entire set of impugned orders by invoking Section 108 of the GST Act, 2017. They proposed to issue a fresh show cause notice to the taxpayer. Accepting this, the High Court quashed the show cause notice dated October 30, 2025, the GST cancellation order dated December 15, 2025, the order rejecting the revocation application dated March 10, 2026, the appellate order dated May 25, 2026, and the consequent GST APL-04.

The court directed the department to issue a fresh notice and pass a reasoned order after duly considering Faiz Enterprise’s defense. All rights and contentions of both sides remain open. The petition was disposed of with these observations.