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Heat a heavy bottom pan on medium heat and add the dry whole spices – dry red kashmiri chilies, coriander seeds, cloves, cinnamon, cardamom, peppercorns, cumin and mustard seeds.
Sauté for about a minute until they are fragrant and slightly browned. Make sure the spices do not burn. Turn off the flame.
Transfer the whole spices to a grinder. Add ginger, garlic, tamarind paste and vinegar.
Add ½ cup water and grind to a smooth paste.
In a large bowl, add the paneer pieces. Add the vindaloo paste to the paneer. Mix well and refrigerate for 15-30 minutes.
Heat a heavy bottom pan on medium-high heat and add oil in it.
Add onions and saute for about 7-8 minutes until they turn golden brown.
Add turmeric and salt. Add the marinated paneer and mix well.
Mix in any remaining vindaloo paste from the marinade in ½ cup water, and add to the pan. Add brown sugar and stir in the curry.
Cover and cook for about 5 minutes until the paneer softens.
Garnish with cilantro and serve hot with rice, naan or roti.