The buyer says the 1 September 2021 Office Memorandum takes your trader-supplier outside the delayed-payment machinery. Is that right?
The Allahabad High Court held it is not. The Office Memorandum relied on is specifically in respect of lending and not for any other purpose, and where the dispute concerns a supply of goods for which payment has been delayed the memorandum is 'not at all applicable'. The remedy is the one the MSMED Act provides under ss.15, 17 and 18, and the criminal proceeding against the buyer was quashed on that footing.
Decided by the High Court (Saurabh Srivastava J) on 2025-11-19, reported as Application under s.528 BNSS No. 25664 of 2025. It bears on section MSMED s.15, section MSMED s.16, section MSMED s.2(n), section 43B(h) of the Income Tax Act 1961, in How Tax Law Is Read and Prosecution matters.
This is the counterweight to the Kerala High Court's reading in Luxe Panel Distributors. For s.43B(h) it matters because the whole argument that a purchase from a Udyam-registered trader escapes clause (h) rests on treating the 2021 memoranda as confining traders to priority sector lending. One High Court has now declined to read them that way in a delayed-payment context, which is the context s.15 - and therefore s.43B(h) - actually operates in.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The applicant sought to quash a charge sheet dated 24 February 2025, the cognizance order dated 25 March 2025 and the whole of Case No. 8483 of 2025 arising out of Case Crime No. 614 of 2024, registered under ss.318(4), 352 and 351(2) of the Bharatiya Nyaya Sanhita. The underlying transaction was a supply of certain goods by opposite party no. 2 to the applicant for which payment had been delayed. The applicant's counsel submitted that a dispute between enterprises registered under the MSMED Act must go through the machinery in ss.15, 16, 17 and 18 of that Act and the Facilitation Council (para 4). Counsel for opposite party no. 2, the supplier, submitted that the delayed payment fell within the Government of India Office Memorandum dated 1 September 2021 and that it was on that account excluded from the benefits of the MSMED Act (paras 5 and 6). The learned AGA supported the continuation of the criminal proceedings (para 7). The judgment does not identify the goods supplied.
The application was allowed. The Office Memorandum relied on by the supplier 'is specifically in respect of lending not for any other purpose'; the matter concerning a supply of goods with delayed payment, 'the Office Memo dated 1.9.2021 is not at all applicable in the instant matter' and the remedy available to the supplier is the one set out in ss.15, 17 and 18 of the MSMED Act (para 8). The entire proceeding of Case No. 8483 of 2025 arising out of Case Crime No. 614 of 2024 was set aside so far as the applicant is concerned (para 9), with liberty to opposite party no. 2 to pursue its remedy under s.18 of the MSMED Act before the competent authority (para 11).
The Court read the Office Memorandum by its subject matter rather than by the breadth claimed for it. Having characterised the instrument as one about lending, it followed that it could not be used to displace the delayed-payment provisions in a dispute about goods supplied and unpaid for (para 8). With the memorandum out of the way, the statutory route in ss.15, 17 and 18 stood available, and a civil recovery for which Parliament has provided a specific forum was not a proper subject of criminal process against the buyer, so the proceedings were quashed and the supplier relegated to s.18 (paras 9 and 11).
the Office Memo dated 1.9.2021 is not at all applicable in the instant matter
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Handle my notice → Ask a CA on WhatsAppThe Allahabad High Court held it is not. The Office Memorandum relied on is specifically in respect of lending and not for any other purpose, and where the dispute concerns a supply of goods for which payment has been delayed the memorandum is 'not at all applicable'. The remedy is the one the MSMED Act provides under ss.15, 17 and 18, and the criminal proceeding against the buyer was quashed on that footing. This was decided by the High Court (Saurabh Srivastava J) and bears on section MSMED s.15, section MSMED s.16, section MSMED s.2(n), section 43B(h) of the Income Tax Act 1961. It is reported as Application under s.528 BNSS No. 25664 of 2025. This is the counterweight to the Kerala High Court's reading in Luxe Panel Distributors. For s.43B(h) it matters because the whole argument that a purchase from a Udyam-registered trader escapes clause (h) rests on treating the 2021 memoranda as confining traders to priority sector lending. One High Court has now declined to read them that way in a delayed-payment context, which is the context s.15 - and therefore s.43B(h) - actually operates in. If it applies to you, the first step is this: Use it where the supplier is a trader and the buyer disputes that the MSMED delayed-payment machinery applies at all.
The applicant sought to quash a charge sheet dated 24 February 2025, the cognizance order dated 25 March 2025 and the whole of Case No. 8483 of 2025 arising out of Case Crime No. 614 of 2024, registered under ss.318(4), 352 and 351(2) of the Bharatiya Nyaya Sanhita. The underlying transaction was a supply of certain goods by opposite party no. 2 to the applicant for which payment had been delayed. The applicant's counsel submitted that a dispute between enterprises registered under the MSMED Act must go through the machinery in ss.15, 16, 17 and 18 of that Act and the Facilitation Council (para 4). Counsel for opposite party no. 2, the supplier, submitted that the delayed payment fell within the Government of India Office Memorandum dated 1 September 2021 and that it was on that account excluded from the benefits of the MSMED Act (paras 5 and 6). The learned AGA supported the continuation of the criminal proceedings (para 7). The judgment does not identify the goods supplied. The matter was decided on 2025-11-19 by the High Court (Saurabh Srivastava J). On those facts the High Court held as follows. The application was allowed. The Office Memorandum relied on by the supplier 'is specifically in respect of lending not for any other purpose'; the matter concerning a supply of goods with delayed payment, 'the Office Memo dated 1.9.2021 is not at all applicable in the instant matter' and the remedy available to the supplier is the one set out in ss.15, 17 and 18 of the MSMED Act (para 8). The entire proceeding of Case No. 8483 of 2025 arising out of Case Crime No. 614 of 2024 was set aside so far as the applicant is concerned (para 9), with liberty to opposite party no. 2 to pursue its remedy under s.18 of the MSMED Act before the competent authority (para 11).
The Court read the Office Memorandum by its subject matter rather than by the breadth claimed for it. Having characterised the instrument as one about lending, it followed that it could not be used to displace the delayed-payment provisions in a dispute about goods supplied and unpaid for (para 8). With the memorandum out of the way, the statutory route in ss.15, 17 and 18 stood available, and a civil recovery for which Parliament has provided a specific forum was not a proper subject of criminal process against the buyer, so the proceedings were quashed and the supplier relegated to s.18 (paras 9 and 11). In the words reproduced by the source cited on this page: "the Office Memo dated 1.9.2021 is not at all applicable in the instant matter"
It was decided by the High Court on 2025-11-19 and is reported as Application under s.528 BNSS No. 25664 of 2025. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section MSMED s.15, section MSMED s.16, section MSMED s.2(n), section 43B(h), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The application was allowed. The Office Memorandum relied on by the supplier 'is specifically in respect of lending not for any other purpose'; the matter concerning a supply of goods with delayed payment, 'the Office Memo dated 1.9.2021 is not at all applicable in the instant matter' and the remedy available to the supplier is the one set out in ss.15, 17 and 18 of the MSMED Act (para 8). The entire proceeding of Case No. 8483 of 2025 arising out of Case Crime No. 614 of 2024 was set aside so far as the applicant is concerned (para 9), with liberty to opposite party no. 2 to pursue its remedy under s.18 of the MSMED Act before the competent authority (para 11). It arises in How Tax Law Is Read and Prosecution matters, on section MSMED s.15, section MSMED s.16, section MSMED s.2(n), section 43B(h) of the Income Tax Act 1961, and was decided by Saurabh Srivastava J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Note the posture: the buyer was the applicant and wanted the MSMED route to apply so that the criminal case would go; the supplier argued exclusion. The holding is the Court's, not a concession. Read it with Luxe Panel Distributors and treat the point as open - neither judgment considers the other and neither is a decision on s.43B(h). Keep the Udyam certificate, the invoices and the date of acceptance on file; the Court proceeded on there having been a supply of goods with payment delayed, and nothing finer.
High Courts differ on this point. The Kerala High Court in Luxe Panel Distributors v Additional Commissioner of Customs, decided 10 June 2025, read the same 2021 memoranda as confining a trader's registration to priority sector lending and nothing beyond. Neither judgment refers to the other. No decision applying or affirming the Allahabad view was located, and none doubting it. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is an order under s.528 BNSS quashing a criminal proceeding, not a tax decision and not an award or an appeal from one; s.43B(h) is not mentioned. Its value lies entirely in the construction of the Office Memorandum at para 8. Note that it was the supplier, not the buyer, who argued the memorandum excluded it from the MSMED Act - the supplier wanted the criminal case preserved - so the Court's rejection of that argument cannot be dismissed as the result of a one-sided contest. Para 8 was assembled from four separate retrievals because the fetch layer truncates quotations; the sentence reads, so far as could be recovered, 'the Office Memo which has been relied upon by learned counsel for opposite party no. 2 is specifically in respect of lending not for any other purpose. The instant matter pertains to supply of certain goods from opposite party no. 2 in favour of applicant for which the payment has been delayed ... and as such the Office Memo dated 1.9.2021 is not at all applicable in the instant matter and the remedy available before opposite party no. 2 is crystal clearly mentioned under sections 15, 17 and 18 of the Micro, Small and Medium Enterprises Development Act, 2006.' The ellipsis marks words not recovered. Paras 3 to 7 and 11 came back only in summarised form and are described here, not quoted. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The application was allowed. The Office Memorandum relied on by the supplier 'is specifically in respect of lending not for any other purpose'; the matter concerning a supply of goods with delayed payment, 'the Office Memo dated 1.9.2021 is not at all applicable in the instant matter' and the remedy available to the supplier is the one set out in ss.15, 17 and 18 of the MSMED Act (para 8). The entire proceeding of Case No. 8483 of 2025 arising out of Case Crime No. 614 of 2024 was set aside so far as the applicant is concerned (para 9), with liberty to opposite party no. 2 to pursue its remedy under s.18 of the MSMED Act before the competent authority (para 11).
TaxSphere, “Dhruv Anand v State of U.P.”, https://taxnotice.vittsphere.com/caselaw/case/dhruv-anand-v-state-of-up-msme-office-memorandum-delayed-payment-goods/ (validity last checked 2026-09-17)
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How does s.15 actually work - fifteen days, or forty-five, and what if the supplier registered after the invoices?
Your client is a trader holding Udyam registration as a micro enterprise. Does that registration carry any benefit beyond priority sector lending?
You paid interest on a delayed payment to an MSME supplier. Can you claim it?
MSMED interest is disallowed under the normal provisions. Does it also have to be added back to book profit?
