The Punjab & Haryana High Court addressed a case where M/s. SRO India challenged a GST Show Cause Notice, arguing it was issued without the tax officer's independent application of mind and relied on an AI tool. The notice contained AI-generated prompts suggesting improvements, which the petitioner highlighted as evidence of improper procedure. The State contended that these AI references were mistakenly uploaded and did not influence the decision-making process.
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The core issue was whether a statutory show cause notice could be valid if prepared using AI rather than through the officer's independent assessment. The Court emphasized that GST law mandates the competent authority to apply its own mind independently when issuing such notices. Reliance on AI-generated outputs was deemed insufficient for meeting statutory requirements.
The Court dismissed the State's explanation of accidental AI references, noting the notice's content indicated AI involvement. Without legal sanction for using AI in this context, the notice was deemed legally unsustainable, and all related proceedings were invalidated. However, the Court allowed the department to initiate new proceedings, provided they independently assess the facts and adhere to statutory requirements.
Order Date - 07 July 2026
Parties: M/s. SRO India Vs State of Punjab and Another
Facts -
- Petitioner, M/s. SRO India challenged the GST Show Cause Notice (DRC-01A) dated 02.02.2025, alleging that the notice was issued without proper application of mind by the concerned officer.
- The petitioner pointed out that the uploaded notice contained AI-generated prompts such as "make it lethal" and suggestions for improving the reasoning, indicating that an AI tool had been used to draft the notice.
- The State argued that AI-related references were inadvertently uploaded to the GST portal and did not reflect the actual decision-making process.
- The dispute therefore centred on whether a statutory show cause notice could be sustained when it appeared to have been prepared using AI instead of an officer's independent assessment.
Issue -
- Whether a GST Show Cause Notice issued with apparent reliance on an AI tool, without independent application of mind by the competent authority, is valid under law.
Order -
- The High Court observed that the GST law requires the competent authority to independently examine the facts and apply its own mind before issuing a show cause notice. Such statutory satisfaction cannot be substituted by outputs generated through an AI tool.
- The Court rejected the department's explanation that the AI references were uploaded inadvertently. It held that the contents of the notice itself created a clear impression that AI had been relied upon in preparing the statutory notice, which was unacceptable.
- Since the department failed to establish any legal sanction permitting reliance on AI for preparing and issuing the show cause notice, the Court held that the notice and all consequential proceedings could not survive in law.
- While quashing the notice, the Court protected the department's right to initiate fresh proceedings. It clarified that a fresh notice may be issued after independently examining the facts and complying with the statutory requirement of application of mind.
