The Gujarat High Court has set aside a series of GST proceedings against Faiz Enterprise after finding that the tax order relied on case laws generated through Artificial Intelligence (AI), including authorities that were either non-existent or irrelevant to the dispute.
A Division Bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati delivered the judgment on August 20, 2026.
Background of the Case
Faiz Enterprise, through its proprietor Mahetar Mahir Farukbhai, challenged proceedings initiated by the State Tax Officer, Unit-67, Surat. The dispute reached the High Court after the petitioner pointed out that the impugned tax order cited several judgments that could not be verified or did not support the issue before the officer.
The Court had earlier taken note of the submissions and observed that the order appeared to rely exclusively on AI-generated case laws. It specifically recorded concerns over citations said to be non-existent and decisions whose stated legal principles did not apply to the matter.
When the matter was heard again, the concerned State Tax Officer, Devang Arvindkumar Yadav, appeared through the State and filed an affidavit tendering an unconditional apology.
According to the affidavit, the officer was a probationary officer and attributed the mistake to his lack of experience. He acknowledged using AI while drafting the order and referring to non-existent and irrelevant judgments. The Court was also informed that he had attended an AI-related training programme on August 18, 2026.
The Court also took note of administrative instructions issued by the Gujarat State Tax Department concerning the use of AI in adjudication and quasi-judicial proceedings.
The instructions require officers to independently verify any case law, statutory provision, rule, circular or notification identified through AI using primary official sources.
They also require authorities to confirm the accuracy and relevance of judgments and reproduce the original paragraph when relying on an AI-generated paraphrase. The instructions further state that AI can assist an officer but cannot replace independent legal reasoning and application of mind.
The Court directed that these instructions be followed strictly and held that violation would amount to contempt of court.
On the merits, the State submitted that the department intended to revise the impugned orders under Section 108 of the GST Act, 2017 and issue fresh proceedings.
The High Court accordingly quashed and set aside the show cause notice dated October 30, 2025, the GST cancellation order dated December 15, 2025, the order rejecting the revocation application, and the appellate order dated May 25, 2026, along with the related GST APL-04.
The Court directed the respondent authority to issue a fresh notice to Faiz Enterprise. It further directed that the petitioner's reply and defence be properly considered and that a reasoned order be passed in accordance with law.
With these directions, the High Court disposed of the petition.
Case Details
Case Title: Faiz Enterprise Through Proprietor Mahetar Mahir Farukbhai v. State Tax Officer, Unit-67, Surat & Anr.
Case Number: R/Special Civil Application No. 10123 of 2026
Judges: Justice A.S. Supehia and Justice Vaibhavi D. Nanavati
Decision Date: August 20, 2026
