₹425 crore customs penalty set aside because the order rested on fabricated case citations
What happened
On 8 October 2025 the Additional Commissioner of Customs in Surat imposed a penalty of about ₹425.28 crore on a diamond exporter for allegedly declaring natural diamonds as lab-grown. The Gujarat High Court dismissed the exporter’s challenge on 20 January 2026.
On appeal, a Supreme Court bench of Justices Dipankar Datta and Sheel Nagu found that the customs order relied on judgments that did not exist or carried fake citations, and that some real judgments did not say what the order claimed they said. The bench attributed this to AI hallucination.
- 8 October 2025
- Surat, Gujarat
- Courts, tribunals and policing
- Language model or chatbotA generative AI tool that the reports do not name. That the officer used one is the Supreme Court’s reading of the fabricated citations.
- Failed or made an error
- Economic or property, human or fundamental rights
- A diamond exporter penalised on the strength of the order
- A court or regulator’s finding
- Added 01.10.2026
What followed
In September 2026 the Supreme Court set aside both the penalty order and the High Court’s ruling. It sent the case back to be decided afresh by a different customs officer of the same rank, and left it open to the department to consider disciplinary action against the officer who wrote the original order.
Sources
- Supreme Court scraps ₹425 crore penalty over fake citations, AI hallucinations in customs order
Bar and Bench,
- Supreme Court overturns Rs 425 crore customs penalty over AI-generated fake citations
MediaNama,
Something wrong or missing?
Records are summaries of what their sources report, and they can be out of date. If you can correct one, add to it, or you’re named in it and want to reply, write to hello@indiaaisafety.org with the record number.