The Punjab and Haryana High Court has set aside a GST pre-show-cause notice after finding that material generated through an Artificial Intelligence tool had been incorporated into the document issued to a company.
The case arose from proceedings against SRO India, which had challenged a DRC-01A notice issued by GST authorities in Amritsar. Such notices are generally issued in matters involving alleged tax dues, interest or penalties.
The notice carried an annexure containing references to AI-based assistance, including suggestions on how the proposed order could be drafted or improved. The company argued that the tax authority had failed to independently examine the facts and had instead relied on an AI tool while preparing the notice.
A Division Bench of Acting Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor agreed that the statutory process required the competent authority to examine the relevant facts and apply its own mind before initiating proceedings.
The Court held that an AI tool could not replace that statutory responsibility.
“Since we find that the show cause notice has been issued primarily relying upon the AI Tool, which does not have the requisite sanction in law,” the Bench observed while quashing the DRC-01A notice dated February 2, 2025, along with the proceedings arising from it.
The State argued that the AI-related material appearing at the end of the notice had been uploaded on the department’s portal inadvertently. The Court, however, did not accept the explanation as sufficient to sustain the notice.
While setting aside the proceedings, the High Court left the door open for the authorities to issue a fresh notice or pass a fresh order in accordance with law. Any such action, it clarified, must follow an independent examination of the facts and proper application of mind by the competent authority.
