The Gujarat High Court has issued a directive requiring state tax authorities to strictly adhere to instructions governing the use of Artificial Intelligence while passing adjudicatory and appellate orders. The court made these observations in the matter of Faiz Enterprises versus State Tax Officer, after it was revealed that a State Tax Officer had relied on AI-generated case laws that were either non-existent or irrelevant to the dispute before him.
The bench, comprising Justice AS Supehia and Justice Vaibhavi D Nanavati, noted during the hearing on August 13 that the officer had cited judgments which did not exist or had no relevance to the legal principles under consideration. The court prima facie observed that the order appeared to have been passed exclusively on the basis of AI-generated case laws.
Subsequently, State Tax Officer Devang Arvindkumar Yadav filed an affidavit tendering an unconditional apology. He stated that he was a probationary officer and that the error occurred due to lack of experience. He admitted to using AI while drafting the order and relying on judgments that were either non-existent or irrelevant. He also informed the court that he had attended a training programme on the use of AI in drafting and adjudication.
Following the court’s intervention, the Additional Commissioner of State Tax issued statewide instructions on August 18, 2026, regulating the use of AI by adjudicating and quasi-judicial authorities. The instructions clarify that AI may only assist decision-makers and cannot substitute independent application of mind. Any judgment, statutory provision, rule, circular or notification identified through AI must be independently verified from primary official sources before being incorporated into an order. If an AI tool paraphrases the ratio of a judgment, tax officers must locate the original paragraph and reproduce it before relying upon it. Authorities must also verify whether judgments remain good law and record reasons when decisions cited by taxpayers are held to be inapplicable.
The instructions further emphasise that orders must reflect independent legal reasoning and record the officer’s own application of mind to the law and the facts of the case. AI output may assist in reasoning but cannot substitute it. The Gujarat High Court recorded these instructions in its order and directed that they be scrupulously followed.
The court warned that any violation of these instructions would amount to contempt of court, in view of the directions issued by it. On the merits of the case, the State informed the High Court that it proposed to revisit the orders against Faiz Enterprise and issue a fresh show-cause notice. Accordingly, the court set aside the impugned order and directed fresh reconsideration.
Advocate Hardik V Vora appeared for the petitioner, while Assistant Government Pleader Raj Tanna represented the State authorities. The judgment was delivered on August 20, 2026.