The supplier registered under the MSMED Act part-way through the relationship. Which supplies does the Act protect?
Those made after registration. The Supreme Court refused the appellant the benefit of the Act because there was no acceptable material to show that any supply of goods or rendering of services had taken place after it was registered as a unit under the MSMED Act. The Court also held that a counter-claim is maintainable before the statutory authorities under the Act.
Decided by the Supreme Court (D.Y. Chandrachud J, R. Subhash Reddy J and S. Ravindra Bhat J) on 2021-06-29, reported as Civil Appeal Nos. 1570-1578 of 2021 and Civil Appeal Nos. 1620-1622 of 2021. It bears on section MSMED s.2(n), section MSMED s.15, section MSMED s.18 of the Income Tax Act 1961, in How Tax Law Is Read matters.
It fixes the test in operational terms a practitioner can actually apply: not whether the supplier holds a certificate today, but whether the supply in question post-dates the registration. For s.43B(h) that is the enquiry that decides whether an outstanding balance is a clause (h) balance at all.
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Cross-appeals arose out of proceedings in which the appellant, a supplier, sought the benefit of the MSMED Act 2006 against the Kerala State Road Transport Corporation. Two questions were argued: whether the provisions of the Limitation Act 1963 apply to arbitrations under s.18(3) of the MSMED Act, and whether a counter-claim is maintainable in such proceedings. The registration of the appellant as a unit under the MSMED Act post-dated the supplies it relied on, and the Court examined what material there was to show supplies or services after registration.
The appellant was held not entitled to seek the benefit of the Act. There was no acceptable material to show that supply of goods had taken place or any services were rendered subsequent to registration of the appellant as a unit under the MSMED Act 2006 (para 26). On the second question the Court held that a counter-claim is maintainable before the statutory authorities under the MSMED Act where proceedings are conducted under s.18(3), the provisions of the Arbitration and Conciliation Act 1996 applying harmoniously (para 24).
The Act creates rights in favour of a supplier as defined, and the statutory machinery is engaged by a supply made in that capacity. Registration being the act that confers the capacity, supplies made before it are outside the scheme, and the Court declined to treat registration as reaching backwards over a completed course of dealing (para 26). On counter-claims, the Court read s.18(3) as importing the Arbitration Act's scheme into the Council's proceedings, which carries with it the tribunal's ordinary power to entertain a counter-claim, so that the whole dispute is resolved in one forum (para 24).
the appellant is not entitled to seek the benefit of the Act.
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Handle my notice → Ask a CA on WhatsAppThose made after registration. The Supreme Court refused the appellant the benefit of the Act because there was no acceptable material to show that any supply of goods or rendering of services had taken place after it was registered as a unit under the MSMED Act. The Court also held that a counter-claim is maintainable before the statutory authorities under the Act. This was decided by the Supreme Court (D.Y. Chandrachud J, R. Subhash Reddy J and S. Ravindra Bhat J) and bears on section MSMED s.2(n), section MSMED s.15, section MSMED s.18 of the Income Tax Act 1961. It is reported as Civil Appeal Nos. 1570-1578 of 2021 and Civil Appeal Nos. 1620-1622 of 2021. It fixes the test in operational terms a practitioner can actually apply: not whether the supplier holds a certificate today, but whether the supply in question post-dates the registration. For s.43B(h) that is the enquiry that decides whether an outstanding balance is a clause (h) balance at all. If it applies to you, the first step is this: Line up the registration date against each invoice date and treat supplies predating registration separately.
Cross-appeals arose out of proceedings in which the appellant, a supplier, sought the benefit of the MSMED Act 2006 against the Kerala State Road Transport Corporation. Two questions were argued: whether the provisions of the Limitation Act 1963 apply to arbitrations under s.18(3) of the MSMED Act, and whether a counter-claim is maintainable in such proceedings. The registration of the appellant as a unit under the MSMED Act post-dated the supplies it relied on, and the Court examined what material there was to show supplies or services after registration. The matter was decided on 2021-06-29 by the Supreme Court (D.Y. Chandrachud J, R. Subhash Reddy J and S. Ravindra Bhat J). On those facts the Supreme Court held as follows. The appellant was held not entitled to seek the benefit of the Act. There was no acceptable material to show that supply of goods had taken place or any services were rendered subsequent to registration of the appellant as a unit under the MSMED Act 2006 (para 26). On the second question the Court held that a counter-claim is maintainable before the statutory authorities under the MSMED Act where proceedings are conducted under s.18(3), the provisions of the Arbitration and Conciliation Act 1996 applying harmoniously (para 24).
The Act creates rights in favour of a supplier as defined, and the statutory machinery is engaged by a supply made in that capacity. Registration being the act that confers the capacity, supplies made before it are outside the scheme, and the Court declined to treat registration as reaching backwards over a completed course of dealing (para 26). On counter-claims, the Court read s.18(3) as importing the Arbitration Act's scheme into the Council's proceedings, which carries with it the tribunal's ordinary power to entertain a counter-claim, so that the whole dispute is resolved in one forum (para 24). In the words reproduced by the source cited on this page: "the appellant is not entitled to seek the benefit of the Act."
It was decided by the Supreme Court on 2021-06-29 and is reported as Civil Appeal Nos. 1570-1578 of 2021 and Civil Appeal Nos. 1620-1622 of 2021. 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.15, section MSMED s.18, 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 appellant was held not entitled to seek the benefit of the Act. There was no acceptable material to show that supply of goods had taken place or any services were rendered subsequent to registration of the appellant as a unit under the MSMED Act 2006 (para 26). On the second question the Court held that a counter-claim is maintainable before the statutory authorities under the MSMED Act where proceedings are conducted under s.18(3), the provisions of the Arbitration and Conciliation Act 1996 applying harmoniously (para 24). It arises in How Tax Law Is Read matters, on section MSMED s.2(n), section MSMED s.15, section MSMED s.18 of the Income Tax Act 1961, and was decided by D.Y. Chandrachud J, R. Subhash Reddy J and S. Ravindra Bhat 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. Do not accept a bare assertion of registration; the Court decided against the appellant on the absence of material, so the evidence of post-registration supply is the assessee's to produce. Read it with Gujarat State Civil Supplies v Mahakali Foods, and disclose the pending larger-Bench reference in NBCC (India) Ltd. Where a buyer wants to set off its own claim before the Facilitation Council, para 24 is the authority that a counter-claim lies.
Under appeal, and the appeal has not been decided. The registration-timing proposition was carried forward by the Supreme Court in Gujarat State Civil Supplies Corporation Ltd v Mahakali Foods Pvt Ltd, decided 31 October 2022, as conclusion (vi) at para 34. In NBCC (India) Ltd v State of West Bengal, decided 10 January 2025, a two-Judge Bench held that the question had never been formulated or decided in the earlier cases and referred to a three-Judge Bench whether an enterprise can invoke s.18 without prior registration under s.8. That is a reference to a larger Bench, not an appeal against this judgment. Nothing was found overruling it, and the holding on counter-claims is undisturbed. 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.
The print view of this judgment returned a 403 and it was read from the ordinary view, which did not yield the limitation holding or the full disposition; evidence is recorded as partial for that reason. The words quoted from para 26 came back whole. The full sentence, so far as recovered, reads 'There is no acceptable material to show that, supply of goods has taken place or any services were rendered, subsequent to registration of appellant as the unit under MSMED Act, 2006.' The Court also decided a question on the application of the Limitation Act to s.18(3) arbitrations; that holding was not recovered and is not stated here. This is an arbitration judgment and does not mention the Income-tax Act. 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 appellant was held not entitled to seek the benefit of the Act. There was no acceptable material to show that supply of goods had taken place or any services were rendered subsequent to registration of the appellant as a unit under the MSMED Act 2006 (para 26). On the second question the Court held that a counter-claim is maintainable before the statutory authorities under the MSMED Act where proceedings are conducted under s.18(3), the provisions of the Arbitration and Conciliation Act 1996 applying harmoniously (para 24).
TaxSphere, “Silpi Industries v Kerala State Road Transport Corporation”, https://taxnotice.vittsphere.com/caselaw/case/silpi-industries-v-ksrtc-msme-benefit-only-for-supplies-after-registration/ (validity last checked 2026-09-17)
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