Author: Ashwarya Sharma, Advocate, Co-Founder & Legal Head, RB LawCorp
Published on: 23/07/2026
Introduction
Artificial Intelligence is rapidly finding its place across legal practice—from research and drafting to document review. Yet an important constitutional question arises when AI crosses the line from assisting legal professionals to performing functions that the law entrusts exclusively to statutory authorities.
The recent decision of the Hon’ble Punjab & Haryana High Court in SRO India v. State of Punjab & Another [2026-VIL-724-P&H] brings that question squarely into focus. In an unusual turn of events, the taxpayer discovered on the GST portal that the impugned notice carried AI-generated drafting suggestions—including recommendations to make the eventual adjudication order “lethal.”
The Court’s response was unequivocal. A show cause notice must represent the independent satisfaction of the Proper Officer. A notice that merely reproduces AI-generated reasoning, without application of mind by the statutory authority, is not a notice recognised by law.
As Artificial Intelligence increasingly enters tax administration, this judgment is likely to become one of the foundational decisions defining the permissible limits of AI-assisted adjudication.
Facts Leading to the Dispute
The petitioner was issued a pre-show cause notice in Form GST DRC-01A, initiating proceedings under the CGST Act.
Unlike an ordinary notice, however, the version uploaded on the GST portal contained an annexure clearly revealing the use of an AI drafting tool.
The annexure contained suggestions such as:
- strengthening the reasoning through additional case law,
- converting the draft into an Order-in-Original,
- adding language regarding “knowledge and connivance,”
- preparing a “defence-proof rebuttal,” and
- even an option to “make it lethal.”
The presence of these AI-generated prompts immediately raised a serious question: had the Proper Officer independently formed the opinion required under law, or had that exercise effectively been outsourced?
The Petitioner’s Challenge
The petitioner argued that the notice demonstrated a complete absence of independent application of mind.
Rather than reflecting the reasoning of the Proper Officer, the contents of the notice appeared to have been substantially shaped by an Artificial Intelligence tool.
The statutory requirement is that the Proper Officer must independently examine the facts, evaluate the available material, and arrive at his own satisfaction before initiating proceedings.
That obligation, it was argued, cannot be delegated to software.
The State’s Defence
The State sought to explain that the AI-generated portion had been uploaded inadvertently and that its appearance at the end of the notice did not necessarily establish that the notice itself had been drafted using Artificial Intelligence.
The High Court’s Analysis
Application of Mind Cannot Be Outsourced
The Court rejected the explanation offered by the State.
It observed that the statutory authority issuing a show cause notice is expected to independently examine the facts and apply its own mind before initiating proceedings.
Whether the AI-generated material was uploaded accidentally was beside the point.
The more fundamental question remained unanswered: why did AI-generated drafting suggestions form part of the official record at all?
AI-Generated Notices Have No Statutory Recognition
The Court further held that the State had failed to point to any statutory provision authorising the use of Artificial Intelligence for preparation or issuance of show cause notices under the GST law.
In the absence of legislative sanction, reliance upon AI for this quasi-judicial function could not be sustained.
Consequential Proceedings Also Fall
Having concluded that the notice itself suffered from lack of independent application of mind, the Court quashed the show cause notice along with all consequential proceedings.
Why the Judgment Is Consistent with Established GST Jurisprudence
Although the factual background is novel, the legal principle applied by the Court is not.
For decades, Indian tax jurisprudence has consistently held that a show cause notice forms the very foundation of adjudication.
The Hon’ble Supreme Court in Commissioner of Central Excise v. Brindavan Beverages (P) Ltd. [2007-VIL-45-SC-CE] authoritatively held that a show cause notice must contain clear, specific, and intelligible allegations. A vague or defective notice deprives the taxpayer of an effective opportunity to defend the case and violates principles of natural justice.
The CGST Act reinforces this principle.
Section 74A requires the Proper Officer to communicate the grounds forming the basis of the proposed demand.
Section 75(7) further provides that no demand may ultimately be confirmed on grounds other than those contained in the original notice.
Read together, these provisions demonstrate that the statutory “grounds” are not a procedural formality—they constitute the legal foundation of the entire adjudicatory process.
Consequently, those grounds must necessarily reflect the independent reasoning of the Proper Officer rather than the output of an Artificial Intelligence platform.
Mechanical Adjudication: The Larger Concern
Perhaps the most important aspect of the judgment lies beyond Artificial Intelligence itself.
The problem highlighted by SRO India is not that AI exists—it is that mechanical adjudication already exists.
Tax practitioners have long experienced situations where replies submitted by taxpayers receive little or no meaningful consideration before demands are confirmed.
The functioning of the GST Appellate Tribunal, which commenced with a backlog reportedly running into several lakh appeals, reflects this broader institutional challenge.
Similarly, the experience under the erstwhile CESTAT has consistently demonstrated that a substantial proportion of departmental orders fail judicial scrutiny at the appellate stage.
The concern, therefore, is not merely technological.
Artificial Intelligence does not create mechanical adjudication.
However, if officers begin relying upon AI-generated reasoning without independently evaluating facts, AI risks accelerating a problem that already burdens India’s indirect tax litigation system.
Why the Judgment Matters
The significance of SRO India extends well beyond one defective notice.
It establishes an important principle for the future of tax administration:
- Artificial Intelligence may assist research and drafting.
- It cannot replace statutory satisfaction.
- Application of mind remains a non-delegable duty.
- A quasi-judicial function cannot be outsourced to software.
The decision also serves as an early judicial reminder that technological innovation must operate within the framework established by statute and constitutional principles.
Conclusion
The Punjab & Haryana High Court has reaffirmed a principle that has long formed the cornerstone of tax adjudication—that a show cause notice must represent the independent reasoning of the statutory authority issuing it.
Artificial Intelligence may undoubtedly become an invaluable tool for legal research, drafting assistance, and administrative efficiency. But it cannot become the decision-maker where the statute requires a human authority to exercise judgment.
As AI becomes increasingly embedded within tax administration, SRO India may well emerge as the leading authority defining the constitutional boundary between technological assistance and judicial abdication.
The broader lesson is equally significant. The challenge confronting GST adjudication has never merely been technology – it has been the persistence of mechanical decision-making. If Artificial Intelligence is employed without meaningful human scrutiny, it risks multiplying precisely the kind of orders that appellate forums are ultimately compelled to set aside.
The law permits officers to use tools.
It does not permit them to surrender judgment.
📎 Attached Article for Detailed Reading
📎 Full Published Version: https://vilgst.com/showiframe?V1Zaa1VsQlJQVDA9=TVRrME5RPT0=&page=articles
(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
