You are told the Supreme Court has settled that a supplier must be registered before the contract. Is that safe to rely on?
Not without qualification. A two-Judge Bench set out the proposition as it appears in Mahakali Foods, held that the question had never been formulated, discussed or decided in the earlier cases, and read s.18 as speaking of 'any party to a dispute' rather than of a supplier. It said it was open to it to hold that Silpi Industries and Mahakali Foods are not binding precedents on the point, but chose not to decide that and referred to a three-Judge Bench whether an enterprise can invoke the s.18 remedy without prior registration under s.8.
Decided by the Supreme Court (Pankaj Mithal J and Pamidighantam Sri Narasimha J) on 2025-01-10, reported as Civil Appeal No. 3705 of 2024. It bears on section MSMED s.2(n), section MSMED s.18, section MSMED s.15 of the Income Tax Act 1961, in How Tax Law Is Read matters.
Any argument that s.43B(h) is not engaged because the supplier registered late is built on the registration-timing proposition. This order tells you that the proposition is under reference, that the textual foundation for it has been questioned, and that an assessment order or an appellate order resting on it is exposed. It also tells you what to disclose when you take the point yourself.
Binding on every court and authority in India.
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The appeal raised the question whether an enterprise must be registered under s.8 of the MSMED Act 2006 before it can invoke the remedy of reference to the Facilitation Council under s.18. The Bench examined the line of authority beginning with Silpi Industries and culminating in Gujarat State Civil Supplies Corporation Ltd v Mahakali Foods Pvt Ltd, in which the Court had concluded that a party who was not a supplier within s.2(n) on the date of entering into the contract could not seek any benefit as a supplier under the Act.
On the text, the Bench held that s.18 is clear and categoric, the words employed being 'any party to a dispute', which cannot be read as 'a supplier' by a process of interpretation (para 14.1), and that the issue before it had not been formulated, discussed or decided in Silpi Industries or Mahakali Foods (paras 12 and 18). It stopped short of holding those judgments non-binding on the point: para 29 records that, though it was possible for the Bench to follow the precedents referred to at para 27 and reach that conclusion, it deemed it appropriate, given the compelling need for clarity and certainty about the applicable precedents, to refer the appeal to a three-Judge Bench instead. The question referred is whether an enterprise can invoke the s.18 remedy without prior registration under s.8, and the Registry was directed to place the papers before the Chief Justice of India (para 30).
The Bench separated the gateway from the entitlement. Section 18 confers a right of reference on 'any party to a dispute', language wide enough to take in the buyer as well as the supplier and not confined by the definition in s.2(n) (para 14.1). Against that, the conclusion drawn in the earlier cases had been stated without the question having been formulated, discussed or decided (para 12), and a proposition arrived at in that way would not ordinarily foreclose the issue. The Bench recorded that it was open to it to so hold on the precedents at para 27, but preferred certainty to a coordinate-Bench disagreement and referred the question upwards (para 29).
the text of Section 18 is clear and categoric. The words employed herein are 'any party to a dispute'
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Handle my notice → Ask a CA on WhatsAppNot without qualification. A two-Judge Bench set out the proposition as it appears in Mahakali Foods, held that the question had never been formulated, discussed or decided in the earlier cases, and read s.18 as speaking of 'any party to a dispute' rather than of a supplier. It said it was open to it to hold that Silpi Industries and Mahakali Foods are not binding precedents on the point, but chose not to decide that and referred to a three-Judge Bench whether an enterprise can invoke the s.18 remedy without prior registration under s.8. This was decided by the Supreme Court (Pankaj Mithal J and Pamidighantam Sri Narasimha J) and bears on section MSMED s.2(n), section MSMED s.18, section MSMED s.15 of the Income Tax Act 1961. It is reported as Civil Appeal No. 3705 of 2024. Any argument that s.43B(h) is not engaged because the supplier registered late is built on the registration-timing proposition. This order tells you that the proposition is under reference, that the textual foundation for it has been questioned, and that an assessment order or an appellate order resting on it is exposed. It also tells you what to disclose when you take the point yourself. If it applies to you, the first step is this: When you rely on Mahakali Foods conclusion (vi), disclose this reference; a bench that finds it for itself will discount the rest of your submission.
The appeal raised the question whether an enterprise must be registered under s.8 of the MSMED Act 2006 before it can invoke the remedy of reference to the Facilitation Council under s.18. The Bench examined the line of authority beginning with Silpi Industries and culminating in Gujarat State Civil Supplies Corporation Ltd v Mahakali Foods Pvt Ltd, in which the Court had concluded that a party who was not a supplier within s.2(n) on the date of entering into the contract could not seek any benefit as a supplier under the Act. The matter was decided on 2025-01-10 by the Supreme Court (Pankaj Mithal J and Pamidighantam Sri Narasimha J). On those facts the Supreme Court held as follows. On the text, the Bench held that s.18 is clear and categoric, the words employed being 'any party to a dispute', which cannot be read as 'a supplier' by a process of interpretation (para 14.1), and that the issue before it had not been formulated, discussed or decided in Silpi Industries or Mahakali Foods (paras 12 and 18). It stopped short of holding those judgments non-binding on the point: para 29 records that, though it was possible for the Bench to follow the precedents referred to at para 27 and reach that conclusion, it deemed it appropriate, given the compelling need for clarity and certainty about the applicable precedents, to refer the appeal to a three-Judge Bench instead. The question referred is whether an enterprise can invoke the s.18 remedy without prior registration under s.8, and the Registry was directed to place the papers before the Chief Justice of India (para 30).
The Bench separated the gateway from the entitlement. Section 18 confers a right of reference on 'any party to a dispute', language wide enough to take in the buyer as well as the supplier and not confined by the definition in s.2(n) (para 14.1). Against that, the conclusion drawn in the earlier cases had been stated without the question having been formulated, discussed or decided (para 12), and a proposition arrived at in that way would not ordinarily foreclose the issue. The Bench recorded that it was open to it to so hold on the precedents at para 27, but preferred certainty to a coordinate-Bench disagreement and referred the question upwards (para 29). In the words reproduced by the source cited on this page: "the text of Section 18 is clear and categoric. The words employed herein are 'any party to a dispute'"
It was decided by the Supreme Court on 2025-01-10 and is reported as Civil Appeal No. 3705 of 2024. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section MSMED s.2(n), section MSMED s.18, section MSMED s.15, 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. On the text, the Bench held that s.18 is clear and categoric, the words employed being 'any party to a dispute', which cannot be read as 'a supplier' by a process of interpretation (para 14.1), and that the issue before it had not been formulated, discussed or decided in Silpi Industries or Mahakali Foods (paras 12 and 18). It stopped short of holding those judgments non-binding on the point: para 29 records that, though it was possible for the Bench to follow the precedents referred to at para 27 and reach that conclusion, it deemed it appropriate, given the compelling need for clarity and certainty about the applicable precedents, to refer the appeal to a three-Judge Bench instead. The question referred is whether an enterprise can invoke the s.18 remedy without prior registration under s.8, and the Registry was directed to place the papers before the Chief Justice of India (para 30). It arises in How Tax Law Is Read matters, on section MSMED s.2(n), section MSMED s.18, section MSMED s.15 of the Income Tax Act 1961, and was decided by Pankaj Mithal J and Pamidighantam Sri Narasimha 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. Where the Revenue relies on late registration to deny clause (h) treatment, or a supplier relies on it to escape the Council, say that the point is open. Keep the matter alive on the record - a ground taken now survives if the larger Bench answers the question in your favour later. Note the distinction the Bench drew between who may refer a dispute under s.18 and who is entitled to the substantive benefits; they are not the same question.
Searched for later treatment; none was found. That is not the same as a source affirming it. No order of the three-Judge Bench answering this reference was located, and no later decision applying or doubting this order was found. The reference should be checked as current before the point is argued. 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 a referring order, not a decision of the question. Until the larger Bench speaks, Mahakali Foods conclusion (vi) remains the operative Supreme Court statement and this order is the reason to plead around it rather than a ground for ignoring it. This judgment's own numbering runs to para 30 and uses sub-paragraphs of the 14.1 kind; the number 52.6 appears only inside the block quotation from Gujarat State Civil Supplies v Mahakali Foods, where it is that judgment's own report paragraph number, and a reader should not mistake the setting-out of Mahakali for this Bench adopting it. The question referred concerns access to s.18, which is not identical to the question whether an unregistered or late-registered supplier attracts s.43B(h); the two overlap but do not coincide. No income-tax decision applying either was located. A check against the document corrected two things: the editor's note had described para 52.6 as a paragraph of this order where it belongs to the quoted Mahakali judgment, and the held had said the Bench declined to treat the earlier conclusion as binding authority, where para 29 shows it found that conclusion open to it and referred the question rather than deciding it. 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.
On the text, the Bench held that s.18 is clear and categoric, the words employed being 'any party to a dispute', which cannot be read as 'a supplier' by a process of interpretation (para 14.1), and that the issue before it had not been formulated, discussed or decided in Silpi Industries or Mahakali Foods (paras 12 and 18). It stopped short of holding those judgments non-binding on the point: para 29 records that, though it was possible for the Bench to follow the precedents referred to at para 27 and reach that conclusion, it deemed it appropriate, given the compelling need for clarity and certainty about the applicable precedents, to refer the appeal to a three-Judge Bench instead. The question referred is whether an enterprise can invoke the s.18 remedy without prior registration under s.8, and the Registry was directed to place the papers before the Chief Justice of India (para 30).
TaxSphere, “NBCC (India) Ltd v State of West Bengal”, https://taxnotice.vittsphere.com/caselaw/case/nbcc-india-v-state-of-west-bengal-msme-registration-reference-to-larger-bench/ (validity last checked 2026-09-17)
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The supplier registered under the MSMED Act part-way through the relationship. Which supplies does the Act protect?
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The buyer says the 1 September 2021 Office Memorandum takes your trader-supplier outside the delayed-payment machinery. Is that right?
