The penalty was levied against Vijay Ghanshyam Gadiya for misdeclaring a consignment of natural diamonds as lab-grown diamonds to pay a lower tariff under Section 114 of the Customs Act, 1962. ^[1] The Supreme Court of India set aside an order issued by the Additional Commissioner of Customs in Surat on October 8, 2025, which imposed a penalty of ₹425.27 crore. ^[2] The Supreme Court bench, comprising Justices Dipankar Datta and Sheel Nagu, found that the customs adjudicating authority relied on non-existent judgments, fake citations, and legal propositions that did not appear in the cited cases. ^[3] A bench of justices Dipankar Datta and Sheel Nagu remanded the matter back to an officer of the same rank to be decided by a different individual. ^[4] The Additional Commissioner of Customs relied on AI-generated case laws that did not exist to support the penalty order. ^[5] The Supreme Court applied the principle from its July 2026 judgment in Pooja Ramesh Singh v. Jammu & Kashmir Bank Ltd., which mandates a zero-tolerance approach towards AI-generated legal material without verification. ^[6] The Supreme Court has not permanently wiped out the customs proceedings against Gadiya but set aside the original Order-in-Original and the Gujarat High Court order, requiring the case to be decided afresh by another officer of the same rank. ^[7]